THE REAL ESTATE CRAZE

A PAGE survey

By AMANULLAH BASHAR
May 16 - 22, 2005

A satellite town spread over 9000 acres, is coming up on the most modern lines of housing concepts in the Eastern suburbs of Karachi in close vicinity to the super highway, is seemingly likely to open a new chapter in the real estate history of Pakistan's first port city Karachi.

Informed sources told PAGE that the Defense Housing Authority (DHA), are the sponsors of this mega project to be called as Phase-9 of the DHA. Though the scheme has yet to be announced formally, the DHA which, has emerged as a leading player in the real estate business, has acquired the title of the land from private owners.

The sponsors of this huge project, a panoramic addition to Karachi's landscape have a plan to develop the required infrastructure including utilities such as electricity and water from their own resources instead of depending on KDA, KESC or KWSB the development agencies which have already reached their saturation point, finding it hard to meet the growing demand of the existing consumers due to resource constraints.

The Association of Builders and Developers (ABAD) was also negotiating with the government for acquiring yet another 2000-3000 acres of land around super highway with a view to develop low cost housing scheme to bridge the gap between demand and supply of the new housing units in Karachi.

Elaborating the idea of developing a low cost housing scheme, Hafizur Rehman Butt, former Chairman ABAD said in an exclusive interview that the government in order to attract foreign investment was offering land at concessionary price to the foreign investors for development of low cost housing. However, the working style of the foreign construction companies involving services of foreign consultants, architects, designs, and other accessories will be enough to kill the idea of developing housing schemes at an affordable price matching to the local requirement. On the back of all these concerns and apprehensions, ABAD has offered to develop such housing schemes within the reach and means of the low income groups of the society. Besides, these two huge projects, an array of medium and large size housing schemes are coming up on the ground which are poised to give a new direction to the real estate business in Pakistan. One of such schemes is initiated by Hafeez Butt who has carved a respectable name among the builders community by giving a number of quality projects in different localities of the city. His forthcoming project over a piece of 200 acres of land is the first environmental project in only 20 percent of the land will have constructed blocks while 80 percent would be developed into a green landscape for the soaring eyes. All these incoming projects, in fact are the glimpses of the coming events in the real estate world of Pakistan. The fast developing Northern Bypass, a ring road around Karachi supported by the under construction Lyari Express way have actually ignited the spark in the construction activity in the so far neglected area around super high in East of Karachi.

These projects do not portray the actual potential carried by this port city, which is the 7th largest city of the world. In fact the real value and potential for investment in Karachi cannot be overestimated as the city has much more in store. Unfortunately, this mega city was never allowed to witness the actual pace of growth on account of resource constraints on one hand and rampant corruption on the other hand, which have been identified as the greatest impediments in the way of development. The corrupt present in the ranks and files of different development agencies always used their positions for personal gains hence they developed an anti-growth attitude instead of a pro-people conduct and pro-development attitude which is the soul and spirit behind the development of various known urban centers elsewhere around the world. One has to run from pillar to post to get NOCs for launching a simple project. You cannot get your building plan and map approved unless you pay extra to the concerned people and such NOCs and approvals are required at every steps of the project.

DECLINE IN PRICES

Recently, a sudden and drastic cut in real estate prices has come with a serious blow to the speculators and the profit makers, the decline however does not harm to the genuine buyers or the people because the quantum jump in prices was artificially created by the speculators by rotating money between stock and real estate business.

Actually, it was merely transactions of files amongst the speculators which are reflected in the undeveloped land transacted by the speculators. Some of the people with their mindset were taking the jump in prices as the boom in the real estate while the situation was otherwise. In act there was an artificial rise in prices of the real estate which does not speak about the real growth in the sector. Since the stock exchange money was involved in pushing up the prices, the artificial balloon was high prices was pricked with the crash the stock market lowering index from historic 10,000 levels to 7000 points.

The genuine professionals engaged in real estate business were of the view that even the prevailing prices were on the higher side of the real worth hence the price decline should not be taken as symbolic to what it is being described as the slump in the real estate market.

Actually, the real estate is the most sensitive barometer indicating the actual state of the economy; it starts improving in the tail end of all other segments of the economy and reflects the downfall instantly as soon as the economy starts to fall. Contrary to these parameters, the economic fundamentals portraying a strong picture of growth in all segments of the economy. Therefore the fears of a slump in the real estate sector are being rumored by the people of vested interest who might have lost some money to make easy money out of the artificially created price hike.

CONSTRUCTION

Undoubtedly, the housing and construction industry is the most vital sector of Pakistan's economy. On one hand it provides shelter as well creates jobs to varied section of highly skilled to unskilled workforce besides providing fuel to downstream industries associated with the construction industry.

It may be recalled that in early 2001, this significant segment of the economy was hit by a major snag on account of issuance of very debatable Ordinance which enveloped into its ambit all the land that was allotted to various individuals or entities on political grounds during the period of 1985 to 1997. The fair allotment of such government land is the responsibility of the people sitting at the helm of affairs but the innocent people who purchase this land at the market rate were punished by using various barriers by the next governments.

Since such allotted land is sold in the open market, the common people, builders and developers purchased these lands from the original allottees at the then market price in good faith and paid the taxes and levies of the government contemplating that these lands hold valid titles for construction purposes.

Ironically, these innocent buyers had to face unexpected setback due to no fault of theirs. Consequent to that Ordinance, all construction activity came to a halt as these lands were declared as frozen lands. The ultimate sufferers were the common people who had booked properties in these projects and those individuals who had built houses on these plots.

Sindh cabinet, in its meeting on January 5, 2005 partially restored the issue of freeze lands. It was decided that all summaries for the lands above 16 acres are to be sent for the approval of the Chief Minister of the province. Due to his busy schedule or whatever the reasons might be, the files of these frozen lands remain pending for months and months and no progress was seen on that account. Amazingly, a cruel culture has been developed in our system that even the genuine and valid files never move towards implementation unless the chain of the people right from clerk to higher positions are made happy.

According to the cabinet decision of January 5, the summaries for pieces of land less than 16 acres were to be approved by Member Land Utilization (LU) of the Board of Revenue on payment of penalties imposed by the government challans in this regard shall be issued at LU level. The matter is moving at snail's pace which had negated the effect of the decision. The bureaucracy, the builders alleged, creating hurdles at such a high magnitude that in the last two months, the numbers of cases approved have not even reached double digit. ABAD says that the officials sitting at the helm of affairs in the Board of Revenue are at the height of inefficiency and are hell-bent to make the decision of the cabinet a big failure. The government on the other hand is unintentionally falling prey to these tactics and an atmosphere of resentment even against the good decisions because justice delayed amounts to denial of justice.

This non-helping out and disgusting environment was a discouraging factor for the people involved in this business. Consequently, over 70 percent of the leading developers left either for Dubai or other parts of the country like Lahore and Islamabad to carry out their business. Actually this is a serious dent to the construction industry and calls for immediate corrective steps to bring the investment and professional hands back to this city.

In this context, some of the leading builders and developers who were the office bearers of ABAD including its Chairman Babar Mirza Chughtai accompanied by the Governor of Sindh Dr. Ishratul Ibad visited the booming city of Dubai recently to show him how Pakistani developers and investors were encouraged in that fast emerging economic capital of UAE. Visibly moved on the flight of human capital and brain drain particularly in the field of construction and the real estate, the Governor vowed to leave no stone unturned to create an enabling and harmonious environment to force not only to the Pakistani investors but also the foreign investors to do business in Pakistan.

DUBAI AIMS TO BE THE TALLEST ON THE WORLD MAP

Some known developers including Manzoor Rufi, Abu Bakar Sheikhani, Iqbal Memon of al-Mashriq are few of a large number of developers of Pakistan are actively participating in the development process of the sprawling Dubai. The governor Sindh during his visit to Dubai witnessed how Pakistani potential creates a new world if allowed to work under good governance free from the bureaucratic chains and the corruption of course.

The picturesque Dubai where high-rises were offering spectacular view to the investors was an example to follow for the policies makers in Pakistan.

In a bid to make its mark on the international map, booming Dubai has once again taken construction to the extreme by building what will become the world's tallest tower.

The foundation work for Burj Dubai (Dubai Tower), whose height remains a secret, was completed last month with 192 piles constructed to depths of more than 50 meters (164ft) and bound together by a thick concrete raft.

Part of a $20bn project, the tower will be built at a rate of one floor per week, the building itself is multipurpose complex, says Robert Booth, executive director of Emaar properties, which is developing the tower to serve as the centre-piece of the Burj Dubai District and Downtown Dubai, a project three times the size of London's Canary Wharf.

"There's about 3.7mn sq ft (345,000 sq m) of built-up density in the building and it's got retail, entertainment, hotel, residences, private corporate suites and an observation deck," Booth said, pointing to a model at the site. The first portion of the building that we released to the public was the residences. Virtually all 700 units, boasting panoramic views of Dubai, have already been sold out to buyers from around the globe. South Korea's Samsung Corp has the $1bn construction contract for the tower, which will cost $2bn in all. It is due to open in December 2008. In total, over 500 consultants working around the world on this project on any given day. They are probably in about 20 different countries to assemble the leading tall tower specialists in the world."

The salient features of Burj Dubai indicates that it will tower over the adjacent Dubai Mall, to become the world's largest and due for completion in late 2007, a luxury hotel, high-rise apartment blocks, man-made lakes and landscaped parks, all cushioned in by a 3km boulevard. At its construction peak, more than 20,000 workers will be laboring to create 45mn sq ft of space for 30,000 homes, making the Burj Dubai site the biggest single construction site in the world.

As for the height of the tower, one has to guess, as a mock elevator at the site displayed a button for the 189th floor. There will only ever be two people who know how tall it is, the chairman of Emaar and probably the building manager. Actually, the building is not exclusively about the height, rather it is about creating a global architectural icon.

Burj Dubai has been designed so as the height can be changed while under construction. The skyscraper is expected to become a tourist magnet, drawing some 3 million a year to marvel at its height and grandeur. About 25mn sq ft of the entire project, covering about 550 acres of land area, is currently under construction. The builders feel that it is probably the best located piece of land in all of Dubai. It is what it is today because it was a military base for 30 years ... It's the heart of all of the major high-density area."

The whole project will be completed by 2010, but the bulk of it will be completed when the tower opens up. Burj Dubai was designed by Adrian Smith of Chicago-based Skidmore, Owings and Merrill. Smith designed the Jin Mao Tower in Shanghai, the world's third tallest. The Burj Dubai development is part of a huge construction drive designed to consolidate the status of this Gulf emirate as a regional business, services and tourism hub.

FOREIGN INVESTMENT

Pakistan's enviable growth rate at 7 percent and other strong economic indicators have their own role in image building of the country. Those who believe in opposition for the sake of opposition were not prepared to acknowledge the ground realities either to serve the interest of the vested interest.

However, the foreign investors have started showing their keen interest relocate their real estate and construction business in Pakistan. Prominent among those interested construction companies are including Malaysians, Chinese, and Saudi business groups.

Recently, a Malaysian trade delegation has shown interest in making investment in various sectors particularly in the real estate in Pakistan.

The 12-member Malaysian delegation, led by Malaysia Construction Industry Development Board member Tan Sri Dato Omar Ibrahim, expressed these views during a meeting with officials of the Islamabad Chamber of Commerce and Industry (ICCI) last week.

Ibrahim said that they wanted to promote trade activities in Pakistan. According to Ibrahim, a number of Malaysian companies were already working on various projects in Pakistan, adding that they wanted more investment/joint ventures in sectors such as housing, real estate, highways, dams, water treatment plants, construction, etc.

The Malaysian delegation was informed by the ICCI President Tariq Sadiq said that there was a shortage of five to six million houses which was increasing by around 250,000 houses per annum in Pakistan.

The real estate sector was booming in Pakistan especially in Islamabad, Lahore, Karachi, Gujranwala, Faisalabad, and Gwadar. All of these cities have their own importance in future growth of the economy. The situation calls for growth in basic infrastructure specially in the areas like energy, shipping, rail, highways, schools, hotels and farm-to-city roads needed priority attention for improving the infrastructure facilities.

OUTLOOK

Despite having enormous potential for growth, the real estate and the construction industry has been sandwiched between the provincial and local government departments due to clash of interests. There is a glaring lack of coordination amongst various development agencies which consequently affects the progress of this important sector. The procedural delays and complexity of the rules and bylaws was another tool in the hands of the corrupt to make personal gains at the cost of national growth. All these bottlenecks will have to be removed to make things easy with a view to develop our cities and towns at par with other civilizations around the world.