LAHORE, Dec 21: The abnormal increase in property prices in the Defence Housing Authority (DHA) has hit a plateau with the collapse of forex companies, estrangement of individual buyers and the investment mafia sensing trouble in the near future.
According to the real estate agents active in the DHA, the prices have stabilized and there has been no increase for the last many months, because no individual buyer is ready to purchase a one-kanal plot for Rs7 million, which used to cost Rs2.5 to three million as late as 2001. The price of a one-kanal plot has gone up to Rs7 million in some blocks and Rs5.5 to six million generally.
Tracing the reasons behind the increase, a dealer said: “It was largely because of a mushroom growth of forex companies. People took money out of banks and blindly invested it in the real estate. In fact, purchase of plots is relatively hassle-free investment when compared to other businesses. There is no labour problem, no tax agents and no legal complications. People with black money as well as those with hard-earned money ventured into the real estate business increasing the prices unreasonably.”
Another dealer claimed that it was not only greedy people daring into an unknown territory. It was an organized mafia luring them with lucrative financial calculations. “Some of the real estate agents, working on behalf of some people inside the DHA, bought agriculture land in the suburbs of DHA without revealing their real motives. They purchased the land as cheap as Rs250,000 per acre. Then DHA expansion was announced into those fields and the price was unilaterally fixed at somewhere between Rs3.5 and four million. The forex companies, accompanied by people from abroad after Sept 11, rushed into a shopping spree. They only helped the mafia keep the prices up to the desired level. Many of the investors from abroad have not returned. They only transferred money to escape harsh investigation into the sources of that money in the foreign land.”
The 120 per cent increase in prices in the DHA also defies the logic of demand and supply, claims a resident of the authority. Around 30 per cent plots are still vacant in the older phases of the authority. There are a lot of plots to meet any increase in demand. But the prices have gone up independently. It is a typical mafia-style increase as has been the case with motorcycles and cars. The city is flushed with Toyota Corolla cars, which dealers are selling for at least Rs150,000 more than the company price. The price of a Honda 70CC motorcycle was recently decreased by Rs10,000, but the dealers put a premier of Rs5,000 on immediate delivery. Similarly, people in the DHA were allowed to keep the notional prices as high as they wished without any official intervention. It was also because it suited those who were suppose to intervene on behalf of the common man. Most of the officers from the Armed Forces get plots in the DHA and want to keep the prices high, he said.
But now, there is no individual buyer to back up the exaggerated prices, says another resident of the DHA. It is because the cost of constructing a house in the DHA has now spun out of the reach of even wealthy people. It now costs around Rs12 million to build a house in the DHA, which could be in the reach of not more than two per cent of the population. People did not buy plots in the DHA even when they cost Rs2.5 to 3 million two years ago. Around 30 per cent of the plot are still free of construction. Who will buy the same plot now for 120 per cent more is anybody’s guess.
The DHA has been able to get possession of XX block after a legal fight of three decades. How long will it take to get possession of a new phase is a wild guess, says a real estate dealer. There is no construction in Phase IV and there would certainly be none in the next 15 years in Phase VI. How many people could afford such a long-term investment, he said and added: “Once they start selling plots to recover their investment, prices would be on a downhill tumble. They increased abnormally and instantly, they would come down slowly but surely.”