The search for an appropriate piece of land in Karachi by Metro, a German firm, is still on. However, it highlights a problem that is hindering business and industrial expansion and blocking new investment in Sindh. This has been recognized at all levels by the government as well as the World Bank.
In its report, the World Bank blames the urban land managers and multiplicity of authorities for all the confusion in the land market. It says that the functioning of land market is adversely affected by (1) high charges of commercialisation of property (2) low floor area ratio and (3) non-uniform building bye-laws across different administrative agencies with little coordination between them.
Many developed countries of the world and quite a few states in neighbouring India (Pondichari, Karnatak) are said to be offering land either free of cost or on highly subsidised rates and on easy terms to attract business.
A few German companies are recently reported to have decided to wind up business in China mainland and are said to be exploring Taiwan, Indonesia, Malaysia, Thailand and Bangladesh as new locations. “Where is Pakistan?’’, asks a bewildered local businessman.
Officials in the government and business leaders say that some positive changes in business environment are however visible now. This has led to economic activities and to quote Nasr Hayat, the secretary of Sindh Industries Department, “there were only 15 active industrial units in Nooriabad in the year 2002. Now, there are 65 active industrial units and many more are coming up’’.
As the economic activities picked up, the demand for land is also increasing. It is coming on heels of an unprecedented price hike of the real estate. In last three years banks offered more than Rs900bn loans at dirt cheap rates and as much as $7 billion remittances flowed in. Never before in last 58 years, there was such an excess liquidity in the market.
The real estate value shot up because of the speculative trading. Speculators even put their money in areas in which the government was planning to create in new industrial zones.
The official price of one acre of land in SITE Manghopir, one of the oldest industrial estates, is Rs0.3 million. But the price of plot located inside Manghopir ranges from Rs25-30 million per acre. while the one that is located on the main road is Rs70 million. There is even a demand of Rs100 million for prime located plot. Korangi is other area where prices of industrial plots range between Rs30-50 million. Prices in Landhi, Federal B Area, North Karachi, Dhabeji, Gharo, Nooriabad, Kotri and Hyderabad are no more affordable for the genuine industrial investors and are still going up.
Businessmen reckon that about 25 to 35 per cent of the industrial plots in all the established industrial estates are in hands of the speculators, a few of them are known stock brokers who operate through their front men. The rules of land selling and purchase agreement and punitive measures such as non-utilisation fee or cancellation of allotment are ignored and never invoked.
A workshop organised jointly by the Board of Investment and the Foreign Investment Advisory Service ( FIAS, a joint service of the International Finance Corporation and the World Bank) identified land acquisition as one the major administrative barrier against investment.
Mohammad Waseem Vohra, a local businessman who was a member of the working group that brain stormed on the issue of land acquisition made it clear that auctioning of land at market price to the business discourages investment. “We want simplification of land disposal rules, reduction in rate of stamp duty and rationalisation of property registry regulations’’ Waseem said and added that expansion of industrial zones and construction of modern high rise commercial buildings are real indicators of economic growth.
He, however, concedes that setting up of industrial zones and construction of high rise commercial buildings should be within the framework of rules and regulations that should ensure compliance of environmental standards, aesthetic values and norms of a civilized society.
Based on the replies received from a number of respondents, the FIAS found that the highest ratio, 79 per cent identified land acquisition as the main barrier in their business and 49 per cent consider this barrier as “severe’’. The FIAS in its Information Pack has focussed on the land issue and identified a host of problems and has given specific recommendations.
After finding that most land in Pakistan is state-owned, with private sector leaseholds at maximum of 99 year with a renewable term, the FIAS recommended introduction of full freehold titles through notifications in civil code-Industrial Property Order 1979 and the Foreign Private Investment Promotion and Protection Act 1976.
It also suggests privatization by way of auction of all land not required by the government for infrastructure, transport or military purposes or which is not protected for environmental purposes.
The FIAS has taken note of the absence of private industrial estates while the public sector estates suffer from poor gas, water, power and road infrastructure.
No doubt, the government is making efforts to overcome the problems but the progress is slow. It has set up the National Industrial Park Company which is in the process of acquiring 1,500 acres of industrial plot of the Pakistan Steel and another 1,000 acres. PIDC land measuring 250 acres of Land has been initially earmarked for NIP.
Zubair Habib, the NIP chief executive said that a consultant will soon be appointed from thereof them after being short-listed. This consultant will help in framing rules and laws and prices. Out of 250 acres of PIDC land, about 170 acres will be available for allotment of half acres of land each to the SME applicants. The aim is to provide land to the genuine investor and safeguards will be taken to prevent speculative investment.