04/08/2021 How three Pakistani brothers created a billion-dollar unicorn in real estate - Rest of World

Reporting Global Tech Stories

REPORT

How Zameen came to dominate

Pakistan’s real estate market
In 15 years, the company went from a bland classified ads site to
hosting two-thirds of all real estate transactions.
Asim Hafeez/Bloomberg/Getty Images

By MUTAHER KHAN and NILESH CHRISTOPHER

6 JANUARY 2021 • KARACHI, PAKISTAN

W hen Zeeshan and Imran Ali Khan moved to Pakistan in 2006 to set
up an online real estate company, they didn’t really know what they
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were getting themselves into. 

Back then, buying or selling a house in Pakistan was a cash-heavy, offline
experience. Internet penetration was about 6.5%, and there was little market
transparency — people lived in fear of unwittingly purchasing or renting houses
on illegally occupied land. There were no trustworthy digital real estate portals.
But the brothers saw an opening. They were ambitious first-generation immigrants
to the U.K. who had graduated with engineering degrees from Imperial College
and Oxford and spent years launching online businesses from their London
apartment.

By the time the brothers arrived in Lahore, they were seasoned entrepreneurs,
having started a range of businesses in the early and late aughts, including an
Alibaba-like e-commerce website, an air filter distribution company, and even a
small gym. In 2006, along with their third brother, Haider, they set up Zameen, an
online real estate service. This was the mid-2000s, and much of the property in
Pakistan’s biggest cities was cartelized or controlled by the military. In parts of the
country, the informal nature of ownership enabled the practice of kabza, the illegal
occupation of land or housing by powerful locals. Low digital literacy rates made it
difficult to reach potential buyers and sellers, and an underdeveloped payment
infrastructure made things even more complicated. The simple idea of Craigslisting
real estate meant overcoming a barrage of obstacles.

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Now, 15 years later, the company claims to have 5.5 million monthly users and has
digitized more than a million land plots and housing units. Every month, it
registers roughly 500,000 new listings, and local real estate agents estimate that
70% of all sale and rental transactions in Pakistan are initiated through Zameen,
which means “land” in Urdu. More than that, however, the company transformed
the way property sales work in Pakistan, the most urbanized country in South
Asia. While the market used to be dominated by brokers who kept a tight grip on
housing costs and availability, formerly private information is now available to
everyone.

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Newly constructed apartments stand in Karachi, Pakistan.

Asim Hafeez/Bloomberg/Getty Images

For the first six years of Zameen’s operation, the brothers were preoccupied with
other businesses, and the country was dealing with its own problem: 2009 was
one of the bloodiest years on record for Pakistan. Terrorist attacks targeting
civilians and security forces killed 3,021 people, according to the Pak Institute of
Peace Studies (PIPS), and extremists controlled tribal areas bordering Afghanistan.
At that point, Pakistan was among the most dangerous countries in the world,
with thousands emigrating to the U.S., U.K., and Canada. To international investors,
the founders struggled to dispel “this errant notion of [Pakistan] being a troubled
place where nothing is flourishing,” as Zeeshan later explained. But the brothers
continued to believe that the company could work.

Prior to Zameen, newspapers were the dominant medium for advertising real
estate in Pakistan. Agents preferred an offline, person-to-person approach, as many

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had trouble using technology. “Zameen used to send SMS leads to agents,” said
Zeeshan. “They would even struggle with using SMS properly.”

Quality control was another problem. Listings had to be manually checked for
fakes and price gouging. Unlike in developed markets, in Pakistan “there are no
safeguards like escrow account services and mandatory regulation to protect both
consumers and developers,” says Umar Nadeem, a housing market expert at
Islamabad-based think tank Tabadlab. As of December 2019, there were more than
1.8 million pending court cases, many related to property disputes. 

At the same time, since 1990, Pakistan has been in the midst of a massive urban
migration. A recent study revealed that 10 cities account for 54% of the total urban
population of 75 million. Around 2012, in the midst of this transition, owning
property in urban areas became desirable. Interest was driven by wealthy expats
buying properties back home, and sales were fueled by military-led housing
projects and $70 billion in Chinese infrastructure investment. Nadeem estimates
that parts of Karachi and Lahore saw the value of a plot of land rise by 400%
between 2008 and 2013. Hungry for quick returns, Pakistani buyers began
aggressively flipping real estate, as an initial investment could be doubled within a
few years. “Real estate, I don’t think it has had a bust cycle. It’s generally boomed
over the years,” says Nadeem.

Zameen caught this wave. They ran local television ads targeting expats and
diaspora Pakistanis. Noting an opportunity, the brothers closed most of their other
businesses to focus on the site. “That was a great decision,” says Imran. By 2013,
they’d signed up more than 3,000 real estate agencies across different states in
Pakistan to provide them with listings. In out-of-the-way areas where brokers
didn’t know how to use computers, they offered training and hired tech-savvy
teenagers as “computer operators” to upload photos of properties. 

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https://www.zameen.com/plotfinder/

Zameen worked with a land-acquisition team to source plots and its “Plot Finder” feature is one of the unique
offers on the site.

To convince reluctant real estate agents to list properties on Zameen, the founders
built a large, dispersed sales team across Pakistan. This had the effect of making
Pakistan’s real estate market more open. People suddenly had access to available
property listings, price estimates, and contacts for sellers — information that had
previously been impossible to get without hiring brokers in local communities. By
the end of 2012, Zameen had registered 65,000 listings; by 2016, they notched 20
million page views — even without the support of a robust technological
infrastructure. “For payment collection, we would have to send someone to pick up
the money,” Imran says. “There was no [online payment] service back in those days.”
The benefits were immediate — Zameen became the only online source of
information about Pakistani real estate anywhere in the world. In the early days, “if
you wanted to look up anything about real estate in Pakistan, you really couldn’t
look anywhere else,” says Farooq Tirmizi, a Pakistani entrepreneur based in
Washington, D.C.

But even though the company charged fees to sellers, this alone wasn’t lucrative
enough. Nor was it standard in Pakistan to charge property management
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companies to advertise listings online. According to Zeeshan, while a real estate

agency in Europe or the U.S. might spend up to 25% of its budget on marketing, in
Pakistan, that figure is closer to 0.5%. And because Pakistanis typically pay for
properties in cash, there were rarely any sales commissions. As a result of all this,
Zameen struggled financially, even as its user base grew. In 2015, reports surfaced
stating that the company only reached $1 million in revenue. 

So the brothers pivoted. First, they began offering exclusive marketing deals to real
estate developers, claiming that Zameen would “sell the property for you.” When a
property did sell, the company often charged a sizable commission. Then, in 2018,
the Khan brothers decided to become real estate developers themselves. They
began co-developing properties with builders and hired a land-acquisition team to
source plots, learn local bylaws, and work with architects. “That kind of control is
key to operating in emerging markets that are informal and unregulated,” says
Zeeshan. By 2019, revenue soared to more than $30 million. Today, in addition to
initiating the majority of real estate transactions in Pakistan, Zameen sells its own
buildings — as of June 2020, they had eight ongoing development projects.

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A car drives past a construction site in Karachi, Pakistan.

Asim Hafeez/Bloomberg/Getty Images

Not everyone is pleased with the brothers’ new strategy. Brokers who shared
details of their arrangements with Zameen allege that they were taken advantage
of. For the brothers, entering the marketing and real estate development businesses
was about taking greater “control” of its supply side. “Typically, if you are a global
classified portal, by virtue of strong laws, you can operate smoothly as a
middleman and get value for your services. [In Pakistan] the farther away you are
from being in control, the more difficult it gets to manage your business,” Zeeshan
says. No formal complaints have been filed against Zameen, but there is growing
discontent among agents.

“It was good as long as they were a marketing [classified] platform, but now they
have become real estate agents themselves, and that puts us at a serious
disadvantage,” a Karachi-based agent who has been on Zameen for five years and

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did not want to be identified for fear of retribution told Rest of World . (There is no
evidence of Zameen giving precedence to its own listings.) 

The allegations Zameen faces are similar to those battering many big Silicon Valley
companies — Amazon selling its own goods after gathering data about other
products sold within its marketplace, Apple favoring its own apps in App Store
search results. But Haider, the eldest brother, is quick to dismiss these
comparisons. “Solutions are supposed to strengthen the local economy,” he told
Rest of World . “These brokers also make money.” Moreover, Haider says, given that
Pakistan has a shortage of 10 million houses, more development is good for the
country. 

In the past year, local agents from Islamabad and Karachi have expressed concern
that Zameen is abusing its position and called for a boycott. “They [Zameen] are
using our data and now are doing their own marketing and sales,” a property dealer
says in a YouTube video. “We are handing our business to them,” he warns. Others
have accused them of becoming an “online real estate mafia.” When asked by Rest of
World about accusations that Zameen employs user-contributed data to gain a
competitive advantage for its own real-estate projects, the company denied the
allegations. 

Even leaving aside these concerns, Zameen has not been a silver bullet for
Pakistan’s troubled real estate market. While it has introduced some transparency,
the big underlying problems — improper land titling, illegal property development,
unplanned modernization, shoddy regulation, and a lack of clarity around
foreclosure laws, for instance — have yet to be fixed. “The intervention [by
Zameen] itself doesn’t lead to better regulation or more formalization,” says real
estate housing expert Nadeem. Serious buyers still hire realtors and brokers to help
them navigate complex bureaucracy and power structures. Yet steps are slowly
being taken in the right direction: Pakistan passed legislation last year to form a
real estate regulatory body in the Islamabad Capital Territory, the first of its kind in
the country.
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As the sector evolves, Zameen has also put property market trends and dynamics
into clearer focus. Thanks in part to a price index on its website, Zameen is now the
de facto resource for all information about the country’s unregulated real estate
sector. While Zameen played an important role “de-monopolizing the role of
brokers,” as Nadeem put it, it also made it significantly easier and cheaper for
buyers to “acquire information to make more informed decisions.”

Since 2007, the brothers have experimented in a handful of different emerging

markets, applying the same principles that underlie Zameen to real estate in Dubai,
Saudi Arabia, Bangladesh, and Morocco. Each site has its own strategy, but all are
shaped by the lessons learned from Zameen’s entry into Pakistan, and all are
organized around data transparency and collection. In 2019, the Emerging Markets
Property Group — the parent company the Khans created to consolidate these
ventures — merged with part of OLX, a rival classifieds portal, and is now valued
at over $1 billion. Zameen was forged in a particularly tough market, and to
paraphrase H.G. Wells, the company managed to adapt rather than perish. The
takeaway for companies is that Western models can’t always be copied and simply
dropped into new markets. Companies have to reflect the circumstances they’re
operating in and, if they want to succeed, to keep evolving.

Mutaher Khan is a technology and business journalist based in Pakistan.

Nilesh Christopher is a Bangalore-based reporter for Rest of World.

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