The right way

April 20, 2016


The writer is a business strategist & entrepreneur.
The writer is a business strategist & entrepreneur.

I AM not against large-scale real estate development projects. In fact we need new suburban developments and new cities even; to accommodate a burgeoning middle class and temper property prices. But if Malik Riaz had wanted to establish one on the outskirts of Karachi, there was a lawful way of going about it.

He would have had to approach the Sindh government with his proposal requiring 23,000 acres and identified what services were required from the government. The Sindh government would have referred his proposal to the counterpart government agency, the Malir Development Authority (MDA) to consider under the relevant legislation, the Sindh public private partnership act of 2010; under a clause titled ‘unsolicited proposals’.

To process the proposal under that law, the MDA would have held a public hearing to take into account stakeholder concerns, not least, from those inhabiting the area. All issues of public interest including environmental concerns and fair compensation for displacement would have been identified. After that the MDA would have constituted a committee comprising government, stakeholders, CSOs and the project sponsor to undertake the required environmental and topographical assessments and determine the level of fair compensation for displacement. Terms of reference would have been agreed to and consultants engaged.

These studies may have required the project sponsor to, for example, not significantly alter the existing topography of the area, identify water requirements and resources, preserve the historical sites and heritage of the area, and to set aside some plots for allotment to the displaced. Separately, the land acquisition act provides for the terms and purposes for which, and to what extent the government would acquire the land and how much the project sponsor would have to himself acquire from the rightful owners. Land for public utility areas such as parks and playgrounds and for services such as schools and hospitals can for instance be acquired by the government on behalf of the sponsor.

Development must follow correct procedures.

Once the studies were completed, the MDA would have approved the scheme, after necessary modifications and provisos and drafted a concession agreement that would have contained necessary terms and conditions that the project sponsor would have to abide by and for which MDA as regulator would be responsible to ensure compliance. Meanwhile, courts and arbitration councils would remain open to redress any grievance to any party at any stage of this transparent process. That would ensure everybody played by the law and nobody got deprived.

Importantly, at this stage the approval is accorded to the scheme, not to the project sponsor. For the law then requires the counterpart government agency, the MDA, to ascertain from the project sponsor (Bahria Town) the amount of time, money and effort expended in developing the project proposal to the pre-groundwork stage.

This includes items such as architectural design, consultants’ and legal fees, travel expenses, money spent on surveys, market research and similar items. This figure is termed the project conception and development cost. To that can be added intellectual property cost and a reasonable rate of return for the sponsor. After that MDA would advertise the details of the scheme and invite competitive bids from local and international real estate developers. The original developer would not only be allowed to participate in the bidding but would receive extra points.

This week an investigative story in this paper has indicated serious irregularities in the process. And while there must be a thorough inquiry into possible wrongdoings too much ‘third-party interest’ — by way of buyers and investors that have become involved — has been created and for that reason I believe the scheme needs to go forward.

So what is to be done? It is still not too late to force the scheme back into the straitjacket of that law. Once all the steps outlined here have been completed (albeit retrospectively), a concession may be developed and bids invited through an international tender. For reasons of expediency, Bahria Town ought to still be allowed to bid, unless disqualified by a court. In the event it is unsuccessful, the law provides for it to receive compensation for the project development cost (and reimburse the money already collected from buyers). This adjustment is to be made with the successful bidder.

The government on its part needs to build capacity to speedily and fairly process such proposals. It was perhaps fear of delays and incapacity in government quarters that contributed in equal measure as greed, to Bahria Town to apparently bypass the proper, lawful channel and instead manipulate the government agencies to its advantage as the story indicates. Let this be another wake up call for the Sindh government.

The writer is a business strategist & entrepreneur.

Published in Dawn, April 20th, 2016