THE skyline of Peshawar is changing and the city is getting a facelift of sorts - spurred on by a construction boom.

For a city rattled since 2007 by frequent terror acts that had left visible signs of destruction on its infrastructure and economy, the sprouting of new multi-storey commercial plazas in Peshawar during the last couple of years is an optimistic sign of the resilience of the real estate business.

According to information gathered from the Building Control Agencies of the four Town Municipal Administrations in the city and the Peshawar Development Authority, three dozen commercial plazas have come up along the main Grand Trunk Road from Ring Road up to Karkhano Market during the last three years.

A similar number of high rise buildings are also under construction in the same area.

Likewise, some two dozen commercial plazas of three to six floors have been raised in various business centres in the city, including Saddar, Dabgari, Khyber Bazaar, Hashtnagri and Nishtarabad.

Since the completion process of a commercial plaza takes three to five years, this means that most of the plaza projects were conceived and executed well before 2007 when the current wave of insurgency started in the province.

“If people can invest and raise huge structures in Afghanistan , which is the main battleground in the US-led war on terror, why shouldn't they do so in Peshawar ?” questions an investor, requesting not to be named.

This investor is constructing a big wedding hall in Hayatabad and a plaza on University Road .

Sharafat Ali Mubarik, President of the Markazi Tanzeem-e-Tajiran Khyber Pakhtunkhwa, says the construction of high rise buildings in Peshawar is not only a reflection of the resilience and courage of local investors, who despite the prevailing insecurity are investing in this capital-intensive business, it is also a good facelift for the city in the shape of new buildings.

According to Usman Bashir Bilour, President of the Sarhad Chamber of Commerce and Industry, plaza construction is easy business. "Even if at any one time its value is depreciated due to law and order or any other reasons, it will revive with the passage of time. One can earn more profit this way than investing money in setting up an industry,” he says.

“Nobody is investing in the manufacturing sector because in the latter, one has to declare sources of earning and subsequently liable to pay taxes. In the case of real estate, there are little or no risks factors involved,” claims Mr Bilour.The private sector is not the only one putting money in the real estate business. The public sector is also investing billions of rupees in the construction of new office buildings as well as houses and flats.Last year, the Khyber Pakhtunkhwa Chief Minister Amir Haider Hoti opened two multi-storey blocks in the Civil Secretariat to accommodate the expanding government offices.

A three-storey Khan Abdul Wali Khan Multiplex is also under construction within the same premises at an estimated cost of Rs230 million. It is expected to be completed next year.

The Cantonment Board Peshawar has also constructed a four-storey commercial plaza in Saddar, while the Bank of Khyber, partially owned by the Khyber Pakhtunkhwa government, has also constructed similar buildings on the Grand Trunk Road.

The Bank of Khyber is also financing the construction of a project of residential flats in the city.

Likewise, the Provincial Housing Authority, a public sector entity, is also involved in a multi-billion rupee project constructing flats for retired civil servants in Peshawar.

Nasir Jamal, Chief Executive of the Deans Group of Companies which is implementing a mega construction scheme of luxury flats in Peshawar , says a major reason behind the construction boom is the need for housing units.

“There has been a massive displacement of people from different tribal regions where armed conflicts are going on. Peshawar is their ultimate destination, where they either purchase their own house or get one on rent,” Mr Jamal tells Dawn.

Construction boom there may be but one major worry of commercial plaza investors is the low rates of occupancy.

Mr Mubarik cites the example of the five-storey Deans Trade Centre, one of the largest business centre in Peshawar which boasts of 3,200 shopping and trading units with a total parking facility of 3,500. Although completed a couple of years ago, its occupancy rate is hardly 30 per cent, claims Mr Mubarik.

While construction of new buildings is a good thing, he says, real outcomes can only be had if these places also see business activity, which according to him, “is not happening at the moment”.

This, Mr Mubarik says, has led to depreciation in the value of commercial property in Peshawar . According to him, a shop at Deans Trade Centre which initially cost Rs10 million is now selling for Rs4 million.

The management of Deans Trade Centre has had to bear the costs of keeping the building neat and clean despite the low occupancy, says the Chief Executive of the Deans Group of Companies.

So while the construction boom may be an optimistic sign for the future outlook of the real estate business, with every investor who jumps into this business hoping that he will get better returns when the law and order situation improves, the low occupancy rate could be a serious indication that the economy is not big enough to sustain the mushrooming commercial plazas.

In fact, Mr Bilour warns that the current unprecedented growth in the real estate business may lead to bubble burst, just like it has happened in major real estate markets like Dubai, Islamabad and Lahore.