Suggestions to Stimulate Pakistan's Real Estate Development Industry

[AhsanAmin]

Real estate development industry is probably some of the most important parts of any country's economy where strong activity can stimulate fast growth in the economy in a way that most related business activity directly benefits the country's indigeneous industries and there are huge social benefits that follow alongwith a better standard of living. It gives people who want to live in the housing projects a great incentive, many times once in a life time, to spend money on building homes, and to make their new houses a great place to live. To give the reader a layman's idea of related industries, I could think of banking and fincance, construction, labour, road and infrastructure developmet, health and education services, cement and related construction materials, steel, furniture and other woodworks, sanitary, marble, other floorings and related industries, home electronics, and many others. And most of these industries depend on local expertise and required materials are mostly locally maufactured.

One of the major problems that are associated with this industry is that there are few laws, not to speak of incentives, that would encourage proper growth of this industry. Whatever existing laws that are made relevant to this sector of economy, are poorly applied. Lack of good legal infrastructure hurts the interests of those landowners whose land later become part of real estate projects, stifles competition between developers, and breeds corruption and other similar ills that hurt our society forever. Had there been a good system that would actually ecourage growth in this sector, and protect the right interests of various parties in the business dealings associated with this industry, we could have seen far greater growth in this sector than the relatively meager activity we witness today when compared with the large population of our country.

I could think of some simple ideas for the government that they could implement to stimulate fast and orderly activity in this sector that actually helps all stakeholders instead of allowing mostly haphazard work by many of the land developers. First of all, there should be a right legal code that helps professional activity in this sector, protects right interests of landowners whose land is acquired, and guarantees that standard of reltated infrastructure development work is good, and also punishes fraud related with many of the land development schemes. The right legal code has to be worked out in consultation with the experts in the related fields. We have to understand that whenever we do not take into account right interests of various counterparties in these dealings, and give undue advantage to some party due to their influence or corruption by them, it will hurt our society in the longer run in many many anticipated and unanticipated ways.

To practically help land development, the governement could identify various blocks of land close to most cities and make a plan to develop them those blocks that makes it as easy for landowners as possible to make money by doing great professional work and ideas, and without resorting to any corrupt tactics. We have to give the developers incentive to do great work in innovative ways otherwise any such idea might not become practical and if we fail to do this properly, most plans to promote useful business activity will not succeed. The government has to start by setting up, at least, minimum parameters for the standard of development work and related infrastructure that has to be completed before house building can start, and ascertain costs associated with this minimum development activity. Of course, this has to be done in a professional way that takes into account how inflation and prices of various inputs including labour and materials might increase with time. The government has to also approximately project the costs associated with acquiring the land, other related expenses, and take into account possible uncertainties and scenarios. These costs could be paid by loans from the commercial banks at appropariate interest rates, considering the governement might possibly guarantee the recovery of these laons from the proceeds that follow when these land development projects complete. The government could now decide on giving a percentage share of housing plots, equally and possibly randomly distributed in various categories of houses and areas in the proposed new housing society, to the developers which they could only gradually offload over an extended period of time into the market after the completion of the housing society. The government's share of houses could be bought by general public at reasonable cost while the developer will retain control of the matters related to running the affairs of the housing society, and providing the required amenities and utilities after completion of all the initial development work. If the housing scheme and related development work is planned and completed in a great professional way, and the housing society becomes very successful, it would greatly increase the value of plots and land assigned to the developer possibly randomly alongside the other plots sold to the general public by the government or by the developer himself in a predetermined fashion. This would encourage the developer to concentrate on using a professional approach and a great skill in design, development and running the affairs of the housing society. And it will help existing real estate developers and those businesses who want to strategically enter in housing estate development business make a long term professional commitment to this sector. Similarly provisions have to be made to make sure that landowners of these identified blocks of land acquired for these projects by the government, are given a fair compensation so that they willingly part with their land. This compensation could be in several forms that could include giving them a fair price of the land, some land in a different area, and/or some plots in the new housing estate after completion of the projects possibly close to where the original land was. Since the estate developer could offload his share of plots only in the future in a gradual fashion, they will have a great incentive to competently run all the related professional affairs that increase the value of the property in that housing society.

And some related thoughts that I had when I visited Bahria Town this morning where I started to think of this idea, there has to be very good standards that home builders would have to follow when they construct houses in these new housing societies. Instead of just defining standards and parameters, there could be interesting ways to promote good architecture in these housing societies. For example, each large housing society could have twenty or more basic designs or architectural templates for every category of houses, and people who intend to live in these new houses could play with these basic templates by adding several of the possibilities for each aspect that is added to the basic template. They could choose their own style for the front portion of the houses or the design of the windows and whatever they like for every complexity on the initial design from large number of different possibilities for each detail. And a computer program could show them how their choice of details would finally show up when the house would be physically constructed. There might be some similar software already in the market, while some interested programmers might want think of making better software that takes into account our local architecture preferences, weather related matters and interesting trends in home architecture in foreign countries. Of course, the plot owners who want to build new homes would have to take advice of some professional engineer who would approve the design for strength of the building and other technical matters. This could in general promote good architecture for the housing places.

These are just very basic ideas and there could be several ways in which we could change some of these ideas or add many more details to these basic thoughts. But if we could devise a great legal code, a right system to implement this code and give generous incentives to professional groups while protecting rights of every counterparty involved in related business dealings, we can easily have a flourishing housing related industry.

 

[AhsanAmin]

Also posted on my blog

Suggestions to Stimulate Pakistan’s Real Estate Development Industry | ahsanamin2999

 

[EasyNow]

I've found that often the oldest cities are the busiest ones and most of their infrastructure is not up to scratch.

Dhaka is like that, it takes 2 hours to travel 2 miles during most times. So the GOB has started developing a new, better structured town called Purbachal next to the current one and will move a lot of the municipal buildings there.

This is a 20 year plan, but the good thing is that it stimulates interest in the adjacent areas and kickstarts private development in those parts. For example, Purbachal is nowhere near ready even after 19 years but all the areas near Purbachal have been developed super fast by private companies to cash in - creating jobs, living space and new communities. Ultimately when the new town is ready, all these areas will also benefit hugely from it.

 

[JawadRiaz]

For real estate development it is necessary to keep an eye on poor people and try to offer the rated that they can easily afford.

 

[AhsanAmin]

@JawadRiaz, Yes, I fully agree with your suggestion that affordable housing is extremely important for a fast developing real estate sector. For large cities like Lahore, it is very difficult for real estate developers to buy cheap land and develop it and still be able to offer housing plots at affordable prices since property prices have already become too high. This is particularly true for DHA side, Raiwind road and along the canal parallel to Multan road and some other areas. Though I believe that speculation is one of the partial reasons for this huge increase in prices in past fifteen years, supply and demand imbalance is definitely another major reason for this sharp increase in prices of residential plots. City should try to address this supply and demand imbalance to stem further increase in property prices and bring them to levels that are affordable to middle and lower middle class. I believe this can be done by Lahore city if they take appropriate steps. As I earlier mentioned there are many areas adjacent to Lahore city where property prices are already too high but there are still many other areas around the city where property prices are still very reasonable since city has not expanded towards those areas. The reason behind this lack of expansion was that these undeveloped areas are mostly adjacent to those parts of the city that once constituted the old city and hence remained underdeveloped since it was too difficult to change the entire old style and relatively poorly planned residential areas and people did not want to develop lands across those areas since real estate developers knew there would be large risk associated with developing lands there if people did not respond well and profit margins would be sharply less. I believe this attitude of apathy and lack of interest towards those areas should change after construction of Rind Road around the city. People want a very easy approach from these newly developed housing societies in suburbs to inner core of the city. Many times the people who want to live in more affordable housing societies cannot afford to have a car for each family member something which has become near almost necessity for urban working families since every working or studying member of the family needs to have enough independence to move around on their own. This can however change if the city develops popular and model transport system that connects these areas to central parts of the city. I believe this is very right time that city tries to take the maximum advantage from construction of very nicely built ring road. City should develop a public transport system that takes people from population points outside of the Ring road to first bus transit/hub stations on Ring Road, and then ring road bus service takes the passengers to appropriate terminal transit/hub stations again on the ring road which are closest to final destination in the city inside the ring road and from the terminal transit/hub ring road station, buses finally take the passengers to all the parts of the city located in the vicinity of that transit ring road station. These transit/hub stations are planned across the ring road so that most of the city inside the ring road is covered such that parts of the city closest to particular transit/hub station are approached through that station. But if right steps are not taken to make this transport system socially popular, all of this effort might remain a failure since moving around in buses is not considered very popular in our country which is an attitude we should try to change with positive effort. This would require proper planning again and everything from buses, hub stations, schedules and transport staff would have to be very right so that the buss service could gain popularity. We could have very well managed air-conditioned buses with very well trained staff. Hub stations could have very nice architecture that could lend recognition to the city. There would be all sort of amenities in the hub stations like proper air-conditioned waiting rooms, coffee shops, tuck shops and wash rooms etc. These hub stations could be run by some good hospitality company who could partially raise revenue from well planned advertising space and advertising opportunities/campaigns on very well managed hub stations such that these advertising opportunities add beauty to the stations and become source of revenue. City could also buy land and plan Malls (to be fully developed later) around hub stations that are supposed to become more successful with the passage of time and could become a source of revenue later. City would also ask for good development code for the real estate developers and try to make it easier for them to make their societies a great place to live. For example city could make a few professional themes for public places like parks, and local markets. There are several societies where developers allocate space for parks and other public places but they are very poorly developed because of lack of good planning and other negligence and if the estate developers have all the good professional themes and pre-requisites handily available, it would be far easier for them to add those features to the their housing societies finally adding a collective beauty to the city. Similarly we know that several people build mosques with great religious intentions but those mosques remain poorly built because of bad haphazard architecture so city should try giving them a few themes and building plans for mosque architecture so that they could add to good architecture of the community. City should also try to stop growth of haphazard building of housing communities around it that would later become a burden on the city and would fail to blend with planned parts of the city. Even if this is not banned outright, city should enforce certain minimum building codes on any new individual and collective residential developments. If possible, City could also decrease taxes on land acquired for systematic real estate development if the developers are ready to pass on the benefit to final customers.
If city takes right coordinated steps to address the supply and demand imbalance in real estate development, it would not only be able to offer affordable housing in many areas, such steps would also take increasing price pressure off those areas where property prices are overheating too quickly and possibly keep those areas in the approach of middle class families in the future.

 

[AhsanAmin]

The reason behind this lack of expansion was that these undeveloped areas are mostly adjacent to those parts of the city that once constituted the old city and hence remained underdeveloped since it was too difficult to change the entire old style and relatively poorly planned residential areas and people did not want to develop lands across those areas since real estate developers knew there would be large risk associated with developing lands there if people did not respond well and profit margins would be sharply less.

People from middle class and upper class did not want to go into these old and poorly planned areas. Even if they did not care about lack of status associated with these areas, it would take them forever to pass through these congested areas and that was even stronger deterrent for real estate developers to develop good housing societies across these areas. I believe there is a lot of relatively cheaper land across the river and east of Shahdra that can easily be converted into wonderful residential areas. If the city government considers it appropriate, they should build at least two bridges on Ravi that could connect the ring road to land across the river. People could get into their car or use public transport and cruise over the river bridges and get into desired parts of the city through the ring road. These housing societies could have both wealthy and middle class people living in it if they achieve the right standards and the housing societies across the river could get very easy access to the city. These housing areas across the river would be far closer to the inner core of the city like Mall road and Jail road as compared to already developed areas on the Raiwind Road where the housing prices have already skyrocketed.
Here are the salient points:
1. Indicate Cheaper lands close to the ring road.
2. Build great, wonderful and very well-planned housing societies there. Great themes for public places and good housing code. Provide great local security. Also provide good local schools and hospital for urgent and emergency health care.
3. Provide great and really perfect road access to the ring road. Possibly bridges might have to be constructed that would help start dozens of housing projects across the river. Arrange for police vigilance on the road that connects to ring road.
4. Provide great public transport to the ring road and into the city after working out all details to provide the incentive to use public transport.

 

[NakedLunch]

All good housing stock starts from the bottom up. If your basic low cost housing is good then everything up the chain will most likely be good as well. In the UK the housing stock is excellent (for the most part) because there are laws that require a basic dwelling to have certain features linked to basic human physical and mental health needs. Like with anything, good regulations and enforcement will always deliver results but start at the bottom end of the market.

 

[AZADPAKISTAN2009]

Till PPP is not kicked out from Sindh no funding

 

[AhsanAmin]

I want to mention another very important aspect that markets in most of our housing communities, save a very few, are lacking. Most or probably almost all of the markets in Lahore lack a perfect building code in one special sense and that is : Individual store/shop/Office buildings are supposed to be unique but they are also supposed to blend well with rest of the buildings in the markets. In most markets in Lahore we see that some buildings have a different height for ground, first and other floors while some other buildings would have different heights for various floors depending upon the choice of the individual builder. The height, dimensions and style of sign boards on market buildings would also greatly vary. The walking path in front of various market buildings would have different design and height etc. For example in some markets, People walking in the markets many times would have to go up a few steps of stairs in front of a few shops and then walk down a few steps of stairs for next few shops and this can continue in all of the market. I believe that there has to be certain degree of uniformity in height of floors within each block of a market. There also has to be some rules about height and width of sign boards. And the design of foot walk in front of shops should have perfect uniformity.
In so many markets in our country, we see that people spend a lot of money on designing perfect buildings and do all sort of great things to give out a great image but the individual shops fail to blend with each other and great individual effort by almost all of the shop owners/builders fail to project a very good collective image of the entire market. This could have easily been achieved if people did the same great effort within certain guidelines for each market that could have been made a part of building code for the market and then great individual effort will easily show itself in the collective beauty of the markets. In so many foreign countries, we see this kind of uniformity in height of floors, and height and size of signboards and also on public foot walk that projects a very special image for the total market.
Markets have a very special place in any housing community and people really like to walk around there and they really enjoy doing it when they are free for example in the evening and at other special times. Just a little bit of building rules and oversight can drastically improve the image and beauty of collective markets. Guiding principle is again that everything has to be individual and unique but there have to be a few laws that make sure that each individual shop or office building blends perfectly with the rest of the buildings in the market.