Mega real estate projects are coming up almost everywhere in Pakistan with huge investments, both in public and private sectors.

SHAMIM AHMED RIZVI, Bureau Chief, Islamabad
Apr 30 - May 13, 2007

Pakistan seems to be on the threshold of real estate boom as mega real estate projects are coming up almost everywhere in Pakistan with huge investment both in public and private sectors. It has also attracted foreign investment in a big way, mainly from Emirates and Saudi Arabia.

Like other major cities of Pakistan, Islamabad is also emerging as a hub of construction activity. Mega construction projects of hotels and infrastructure initiated by the Capital Development Authority (CDA) and Ministry of Housing & Works have come up with huge investments from public and private sectors, including foreign investors.

The CDA has decided to open up seven new residential sectors in Islamabad to meet the rising shortage of residential accommodation, besides launching many projects of hotels and infrastructure. Many well known local companies like Baharia Town, Rafiq Habib Construction Group and Grace Land Housing Society have launched many projects of plot-developing and even construction of houses suitable for various income groups in and around Islamabad. At least three multinationals of world fame with vast financial resources and latest technology have already started work in Islamabad on many hotels and housing projects with billions of dollars investment.

During the last year a Dubai-based construction giant, the Emaar Group, hit the headlines for introducing three real estate projects in Islamabad and Karachi with a total outlay of $ 2.4 billion. The biggest deal yet has been in Karachi where Emaar has been allotted two offshore islands Bundal and Buddo (covering an area of 12,000 acres) for the development of a modern city with 15,000 housing units, commercial facilities and resorts in 13 years at a cost of $ 43 billion. A 1.5 km bridge constructed at a cost of $ 50 million will connect the islands with Phase-8 of DHA.

In Islamabad, Emmar is building luxury villas in DHA and in a promotional exercise recently it invited prospective investors to a sumptuous lunch at the site with only one's cheque-book and CNIC as his entry pass. A huge Arabian tent was especially imported from UAE for the occasion. Those still undecided about booking a villa costing around Rs. 30 million each, were offered to register themselves with a non-refundable fee of Rs.35,000.

Another Saudi backed real estate enterprise Pak-Gulf Construction - has purchased 8.5 acres of land in front of PIMS in Islamabad in open auction for $ 143 million (Rs. 8.5 billion). A Saudi prince reportedly showed direct interest in the deal and visited the site personally accompanied by Prime Minister Shaukat Aziz. The first installment on taking over possession of the land was received by CDA in Pak rupees while the remaining amount has been staggered over several annual installments.

The project includes the construction of a seven-star hotel, 250 residential apartments and a shopping mall on international standards. Each apartment or a shopping facility is expected to cost Rs.10 million-plus. The asking price of the penthouse on the rooftop may exceed Rs 80 million. UAE-based Al-Ghurair is already constructing a multi-storied complex in DHA Islamabad.

Foreign interest and FDI in Pakistan is a welcome development, especially in the construction sector. Besides generating employment and transfer of technical excellence, it also accelerates production in about 40 ancillary industries. According to official estimates, the construction sector employs 2.21 million people, which represents about 5.77 percent of the labour force.

Realizing the importance of housing sector in economic development of the country, Prime Minister Shaukat Aziz has embarked upon a comprehensive strategy to revitalize housing sector in the country to boost economic activities. Since his assumption of prime ministerial office, he had held several meetings with his economic managers and senior officials of Ministry of Housing and Capital Development Authority to put the housing sector on sound footings. Provincial governments were directed to revamp their development bodies to develop the land in the cities to begin housing schemes to meet the huge shortfall of 7.5 million housing units in the country. It was decided to computerize the land record to firm up titles of the land to pave the way for transfer of land smoothly.

Under his directive the Housing Ministry has asked the provincial governments to allocate land for the construction of housing units in each district of the country for poor segment of society on public-private partnership basis. Banks were allowed to extend loans to the private sector to develop housing schemes and build plazas, houses, apartments and shopping centers.

The stalled development work in sectors D-12, I-14,15 and 16 has already been started, while designs of underpasses and the fly-over had already been approved to begin the work, which would provide developed plot for 100,000 housing units.

A number of policy measures have been taken by the government for the promotion of housing as a part of construction industry. These decisions have certainly helped boost the construction industry. Some of these decisions are reproduced below:


The provincial and local governments shall identify state and other lands in and around urban and rural settlements for housing developments for immediate action. Land availability shall be enlarged through various innovative measures like land banking on continuous basis to cater to at least 5 to 10 years development plan needs. Land Acquisition laws shall be suitably amended to make provision for unified transparent and market value-oriented system and litigation minimization. Federal and provincial funding and assistance shall be available for infrastructure amenities and other developments only in the planned areas. Land disposal systems shall be developed which are unified transparent and market-oriented with open auction policy and exemption for special needs.

Provision of trunk infrastructure shall be the responsibility of utility agencies like WAPDA, PTCL, SNGPL, SSGCL, KESC, etc. The cost of trunk infrastructure shall not be an additional charge to the public or private housing development schemes within the planned areas. Development of comprehensive land information system, including inventory and land classification, settlement patterns, land values, land availability, etc, shall be a mandatory requirement; development of master plans/structural plans/ outline development plans shall be mandatory requirement for all urban and rural areas; the concept of integrated development optimizing land use shall be promoted. De-concentration of metropolitan and major urban centers shall be encouraged.


Financial institutions shall be encouraged to give mortgage loans for housing purposes at market rates. All commercial banks shall be encouraged to advance loans for housing and housing projects by earmarking a substantial percentage of their loan portfolio like other industrial and commercial projects. Housing refinance window shall be set up at State Bank of Pakistan for long-term funds from multilateral agencies

Part of the sale proceeds of public land value shall be set aside to provide plots for low income housing and housing for the poor and needy at concessionary rates. Financial institutions and housing financial institutions shall be encouraged to float long-term bonds at market rates to raise housing finance. Housing finance institutions shall be promoted to encourage savings and providing credit from community based finance and other sources.


The annual disbursement of HBFC loans shall be enhanced from the present Rs. 1.2 billion to Rs. 7.00 billion over the next five years. HBFC and other financial institutions shall formulate packages of preferential and people-friendly economic mark-up rates with affordable system of installments for prepayment to provide affordable credit to low-income groups.

HBFC shall reintroduce bridge financing and bulk financing of housing projects through escrow accounting together with appropriate safeguards.


The foreclosure laws shall be introduced to ensure effective recovery of loans and advances from the defaulters. Simplification of procedures for land transactions and standardization of mortgage documents will facilitate sale and purchase of housing.


Non-utilization fee shall be charged on annual incremental basis only after notified handing over of the development scheme by the development agency to the municipality. Housing and construction companies shall be charged via Presumptive Tax Regime, which shall not exceed 1% on yearly receipts. Stamp duties and registration fees, which are exceptionally high as compared to other countries, shall be adequately reduced to an aggregate total of 1% to enhance registration, improve documentation and increase revenue receipts. Collection of levies like EOBI, education cess, social security, professional tax, etc. shall be made one window operation. Banks and DFIs shall expend credit facilities for balancing modernization and replacement (BMR) of machinery used for housing and construction industry. Import of plant and machinery and spares by the housing and construction companies, not manufactured locally, shall be exempted from custom and import duties in excess of 10%. This will be in accordance with government notification declaring housing and construction as priority 'C' industry.

Guarantees issued by 'A' rated insurance companies approved by the Securities & Exchange Commission, in respect of earnest money, retention money, performance maintenance & mobilization advance shall be accepted by various government agencies, departments, etc. for implementing housing projects. The duties and taxes on major construction materials shall be rationalized and reduced to make construction more affordable. As a first step excise duty, sales tax and other levies on cement & steel shall be reduced substantially.


No stamp duty/registration fee, etc shall be charged for the housing mortgage. Property tax on rented property shall be reduced from the current high rate of 25% to 5%. Property tax shall be rationalized for self-occupancy and shall be adequately lower than rented property.


All new construction of houses on plots measuring up to 150 sq. yds & flats/apartments having an area of 1000 sft shall be exempted from all types of taxes for a period of 5 years. Land for housing schemes shall be provided to development agencies and private sector builders and developers on concessionary rates subject to the condition that proportionate subsidy is passed on to the 'target group'. Housing loaning agencies and companies shall provide standard and cost effective designs and plans to the prospective home builders.


To promote rural housing, the provincial government shall examine the possibility of granting proprietary right to individuals and families residing in houses constructed on state land. Subsidized micro loaning facilities shall be extended for rural housing construction and improvements through micro financing systems and institutions like Khushali Bank, Zakat funds, etc.

The role of local bodies in planning determining needs and preparing action plans to mitigate the housing shortages shall be effectively defined, including resource mobilization at the local level. Construction clinics shall be established in rural areas to provide guidance and advice for cost effective, durable and environment-friendly construction.


Effective coordination and application of all research institutions in public and private sectors shall be ensured. Housing and construction material research and development through special tax concessions and concessional finance shall be encouraged. Use of indigenous materials, development of local talent for housing construction projects shall be enhanced and encouraged.


Provincial governments shall develop packages in which prime state land within urban centers, occupied by the Katchi abadies, shall be offered to the private developers for commercial use provided they arrange and finance upgradation or relocation of Katchi abadies.


A countrywide programme shall be undertaken for development or satellite, intermediate, secondary and industrial towns as employment centers of the future, specially, for the rural population and to reduce further migration to urban investors and developers. As a result of the coordinated efforts of Federal and Provincial government and concerned private sector stakeholders, a large number of policy measures have so far been implemented resulting in the improvement of overall housing situation in the country besides availability of affordable housing finance to the extent of Rs.34 billion in the market.


Immediately after the earthquake of 8th October 2005, Cabinet was briefed on 13-10-2005 regarding the earthquake relief and it was inter alia, decided that a review of the building codes and regulations will be undertaken at the national level to ensure safety and security of the residents of buildings. Accordingly, a committee headed by Secretary Housing & Works and represented by Ministries of Petroleum & Natural Resources and Environment, Geological Survey of Pakistan, Pakistan Metrological Department, Pakistan Engineering Council Capital Development Authority, Quaid-e-Azam University Islamabad NED Engineering University Karachi, UET Taxila, NWFP UET Peshawar, Earthquake Rehabilitation & Reconstruction authority (ERRA) and Nespak consultants, has been constituted for revision/updation of Building Code of Pakistan.

M/s Nespak was assigned the task for revision/updation of the Building Code of Pakistan in the context of recent earthquake and in the light of reports prepare by various international agencies for making the building earthquake resistant. They will complete the task in a phased manner.

Adoption of International Building Code 2003 applicable for designing of the building in the area. Enforcement of revised building code/parameters by CDA/RDA under their existing building byelaws/regulations for Islamabad/Rawlpindi area.


Real Estate Investment Trusts (REIT) in Pakistan companies that own real estates and float their shares in the stock market would bring the real estate business back to its feet. The Securities and Exchange Commission of Pakistan has prepared the draft of rules that will govern REIT in Pakistan. There is a lot of legal requirements that will have to be completed before the launch of REIT in Pakistan, even when they are launched, these will have a daunting task of spreading awareness among people of what they are and how they operate before winning investors' confidence and enticing them to consider real estate investment again.