Taking a drive through any major city in Pakistan, one sees many billboards, standing tall above the ground. Most advertise consumer goods such as soft drinks and frozen foods, or showcase the latest fashion trends. But for the past few years, a new type of billboard advertising has accelerated at a rapid pace: that of the housing society.
The welcoming, confident faces of beloved celebrities dressed to the nines beam out at you in the foreground of lush green grounds, glittering artificial lakes, golf courses and white villas that adorn the billboards. The boards usually also show you the required figure one would need to cough up to begin their investment in the project, along with a set of dates before which one must register themselves and when one can expect to take possession. The issue, unfortunately, is that most people don’t intend to take possession.
Housing societies and the larger market for real estate have proliferated across Pakistan at an astounding rate. Priced exorbitantly high for the average consumed in the country and modelled on the designs (though rarely the standards) of elite foreign residential neighbourhoods, these housing societies are the new hub for investment in the country, with both domestic and foreign players pouring hundreds of millions a year into them. Real estate assets in Pakistan are currently valued at over $300 billion dollars; roughly equivalent to the country’s GDP.
What has led, however, to this remarkable development?
It’s safe and easy; simply put.
In an economy that lacks strong regulation, well-functioning markets, political certainty and fiscal stability, people are reluctant to invest in business ventures that may the next day nose-dive in the face of sudden shocks, which the country is woefully unable to insulate itself from. Land, it seems, is good as gold. Cultural values prioritising land ownership compound the lack of alternate, safe business options and means that people with money to save are glad to do so by spending on land; the price of which increases faster than either the general inflation rate or the prevailing interest rates in the country.
The rapidity with which land prices rise is also a factor that means that people investing in the real estate market are now no longer those who really ‘need’ land, i.e. for construction of a home or other purposes. The market has become quite like a stock exchange, where ownership of land is easily and quickly exchanged between investors that are essentially speculating on the future values of these pieces of land. “Files”, as they are called in common parlance, switch hands several times before being sold to the eventual consumer who intends to build something on the land, if ever.
The real estate market has also become a strawman for the government to point to bustling economic activity. Imran Khan touted the potential in the real estate sector by planning large-scale construction, ignoring the fact that most land in this market is not for the purposes of construction, at least not in the near future. It is also a convenient way for the government to wash its hands of the responsibility of providing public housing, pointing to the sheer weight of private investment in the sector. The glaring problem is that these houses are not by any stretch of the imagination intended for the poor, or even the middle-class of the country.
Speculative investment in the market has the effect of further causing prices to skyrocket due to the heightened demand, making affording a house seem an increasingly unlikely phenomenon for those who wish to buy land or property solely for the purpose of living there.
For macro-purposes, the activity of the real estate market in Pakistan is one of Unproductive Revenue; an economic concept that refers to the creation of money without the creation of “real goods” to go along with it, on the back of speculation. The problem with unproductive revenue is that this money represents a significant drain on the economy, pulling investment away from productive ventures such as industry and thereby ending other sources of earning, i.e. through production and exports. Though opening the market for real estate to foreign investors – as is already the case with the arrival of Gulf real estate and property giants such as Emaar in the country – would enable money to flow in, the root problems are not solved.
In the absence of construction upon and ‘improvement’ thereof of this land, investment in the real estate sector does not create jobs, nor does it create goods for the population to consume. While it may represent a form of saving, it is saving for the purpose of private consumption and does not lead to the accumulation of productive capital for growth, which is the economist purpose of savings.
There are numerous other, social problems, associated with these housing societies. Most, such as Bahria Town, are increaingly built on land that had already been settled by people, by dispossesing these people of their land through the use of force. We are quick – and right – to criticise settler-colonists such as the Israeli state when they do the same, yet the media and much of the public turns a blind eye to this forced removal of people within our own country by private moguls.
Furthermore, the overwhelming majorityof these different private societies, as mentioned before, are created to cater to the same stratum in the country; the top few percent. Those who can afford to often hold investments in multiple societies at once, and are content to leave the land empty till they wish to sell. As such, the market is increasingly becoming more and more unaffordable and ownership of land is increasingly seen as an asset rather than a right due to people who need a place to live.
Real estate in Pakistan thus represents another significant failure of its government and public institutions to curtail the capture of the state’s assets and potential by those who simply earn rent on it and do not carry out productive activity. The hundreds of millions of dollars that flow into the market could – and should – be used to invest in productive capacity to pull the economy out of its dismal state… but after all: it’s the rich people’s money. Who are we to tell them what to do with it?
Taut Bataut – is a researcher and writer that publishes on South Asian geopolitics, exclusively for the online magazine “New Eastern Outlook”.
