The price of a housing unit in some of the upcoming projects, where the work is at very initial stages, ranges from Rs 15 million to Rs 50 million and the price is going up further.

SHABBIR H. KAZMI, Special Correspondent
Apr 30 - May 13, 2007

Historically, Karachi has been known as 'City of Lights'. It has been the hub of economic activities. It had also gone through turmoil for nearly a decade. It has once again emerged as hub of economic activities. Foreign participation is conspicuous, particularly in the real estate development.

Lately, construction of many mega housing and commercial projects has commenced in the city. Besides, developing projects in the main city the focal point is the coastal line. Projects have also been sponsored in two adjoining islands for elites of the elite. The price of a housing unit in some of the upcoming projects, where the work is at very initial stages, ranges from Rs 15 million to Rs 50 million and the price is going up further.

For some of the people living outside Karachi the prevailing price of Rs 10 million for an apartment consisting of less than 2,000 sq. feet may sound 'mind boggling'. However, the fact is that in certain areas prices have gone up by three to five times in last five years.

For example, three years back price of a three bedroom apartment in Askari-IV was less than Rs 3 million, which is now hovering around Rs 13 million. At an average price of a house built on 500 sq. yards starts from Rs 5 million and goes up as high as Rs 50 million depending on the locality and quality of construction.


Some analysts say that price of property has skyrocketed in Karachi mainly due to a number of reasons, the key being per capita income of people living in certain localities. This ranges from US$ 10,000 to US$ 20,000 as against an average of around US$ 500 for the country. Income is on the rise and number of people drawing above US$ 10,000 is rising at a very fast rate.

Added to this is the fast developing market of consumer finance, including mortgage finance. Many people who can provide documentary evidence of their income are opting for mortgage finance rather than living in a rented house. Simply because the monthly installment is even lower than the monthly rent. However, financial institutions are still focusing corporate employees, drawing up to Rs 100,000 per month salary. The next group in focus is employees drawing up to Rs 50,000 per month salary.

One of the serious impediments in the development and proliferation of mortgage finance is lack of clean title of properties. Historically, properties in Karachi have been bought and sold on Pagri (goodwill) and Power of Attorney. Since title of such properties does not rest with the person possessing the property, these cannot be financed by the financial institutions.

According to a report, 90% of all the lands do not have clean title. This is due to poor record keeping and complicated as well as outdated updating procedure. All the record has to be computerized and updated to ensure transparency in transfer of the title to facilitate mortgage financing.

Along with this fast-track courts have to be established to rectify all the outstanding land disputes in the shortest possible time. This will open new avenues for financing and investment in the real estate and lower the overall cost of the projects.

Lack of clean tile is also true for the properties being developed under Askari housing. There has always been an embargo on transfer of ownership of these housing units for a specified period but sale/purchase of these units is very common. This is only because of an underlined assurance that after the stipulated time the properties are transferred in the name of the buyer.

Then are those housing units where sub-lease could not be executed after decades of handing over of possession. This is mainly because of grant of completion certificate by the Karachi Building Control Authority. Reportedly, completion certificates cannot be issued due to violation of bylaws.

After hurdle in the development of mortgage finance is higher interest rate and short tenure of financing. The situation prevails because of limited number of financial institutions providing housing finance. The key factor is absence of proper credit line. Lately, commercial banks have started offering mortgage finance but they suffer from mismatch of funds. Most of the deposits are of less than one year tenure but normally housing finance tenure ranges from 15 to 20 years. The central bank has a window offering funds to the commercial banks. However, funds are linked with KIBOR, which makes it too expensive.

Another factor curbing growth of construction sector is virtually no offer of land by the government. Developers and builders are forced to acquire land from existing owners of single housing units and agricultural land. This requires transfer of title of land in the name of proposed housing scheme as well as 'usage'. Conversion of agricultural land to housing scheme is very tedious and also involves a lot of 'speed money'. Any delay in transfer of title, leading to slowdown in construction pace, adds to the cost, which ultimately has to be recovered from the owners.

It may be true that new projects are coming up in the city but most of the new projects are located on Northern Bypass or in its close proximity. Plots are being sold with a promise of handing over of the possession after five years and the process of demarcation has not started as yet. Most of the proposed housing schemes are located at a distance of 20-30 kilometers from Sohrab Goth.

As the foreign investment has started coming in the construction sector two impediments have to be removed at the earliest. Adequate infrastructure is the prerequisite for accelerating construction to meet the shortage of housing units. The three missing items are: 1) shortage and interruption in supply of electricity, 2) virtual dependence on 'tanker mafia' for water supply and 3) highly depleted and inadequate effluent disposal system. These are not the issues of areas where middle and low income people live. Residents of DHA also suffer from these problems.

Phase-VIII is often termed the biggest housing scheme of Asia as it comprises nearly 50% of DHA Karachi. It is being developed on reclaimed land and is surrounded by Arabian Sea on three sides. NESPAK, specializing in planning and development of airports, seaports and bridges, has designed this prestigious project.

On top of this the DHA has succeeded in attracting world leaders in construction to build their projects here. The names include Meinhardt's Creek City, Silicon Valley's E-Planet, and Emmar of Dubai. To meet water and electricity requirement a desalination plant is being constructed.

It is necessary to highlight that now the focus of investors and buyers is Phase-VIII, which is almost of the size of remaining seven phases. If all these basic amenities are still inadequate in the phases developed decades ago, one must think at least 10 times before signing agreement for the booking and purchase of any property.


Last but not the least the current focus is on housing units for rich and middle and lower income groups are being ignored. This is evident from the fact that all the skyscrapers lately announced in Karachi put together offer around 10 thousand residential units, which are highly inadequate keeping in view per capita income of residents of Karachi.

Having said this, there is an annual demand for at least half a million housing units for middle and low income segments. Virtual absence of low cost housing schemes is proliferating spread of Katchi Abadis in Karachi. Low cost housing schemes just cannot be developed without active participation of the government. The government has to provide land at low cost and also ensure soft term housing finance.

It is also important to point out that Karachi falls in highly earthquake-prone areas. Now a lot of construction is going on the reclaimed land and builders are talking about 25 to over 50 storey buildings. One really wonders how the existing utility companies and civic authorities are going to keep these properties in upright position.

The existing road network is already a serious issue. There are serious traffic jams and commuters are often stuck for hours. Phase VIII, once even 50% occupied, would further aggravate the situation as there would be two exit/entry points.

It is heartening that DHA is spending billion of rupees on the construction of infrastructure. However, recent rains and growing traffic jams demand better planning and speedy completion of these projects. One still sees overflowing open drainage system and experiences feet high standing water on main and side roads during monsoon season.

The City District Government is also busy in Karachi's face lifting or makeover. Many flyovers and underpasses are being constructed, main arteries and service roads are being widen and remodeled. However, infrastructure work pending for decades just cannot be constructed in months and days. Having said this it is necessary to highlight that there is lack of coordination among various agencies/utility companies as well as quality of work is much inferior compared to international standards.