Pakistan pegs all its hopes on a real estate miracle

After being down in the dumps for two years, Pakistan’s economy is showing signs of revival. The evidence is early and this are not like the roar of an awakened lion; more the cooing of a bird that senses some mitigation in predatory circumstances.

Much of this revival — better GDP growth figures, more credit utilisation and parts of the economic sectors like agriculture and large-scale manufacturing posting growth — would not have been possible if this wasn’t for the push from the real estate.

Big construction has pushed up demand for all of its affiliated industries — about 18 of them — and has made cement factories work overtime.

The government has deliberately fuelled this engine of recovery by showering it with concessions like low interest rates and fast-tracking its low-cost housing schemes.

Most of the industrialists deal in real estate as well and thus qualify for these incentives — on top of those that are granted to them for their other businesses. They are loving it and are quickly expanding their financial activities, breathing life back into a deflated economic body.

The Imran Khan government hopes that this activity would see another spurt in a year’s time — closer to the next elections — when not just the super-rich, but the middle and lower middle classes also begin to take part in real estate related deals.

Buying, selling and construction cycle

If that happens, the happy assumption is, Pakistan would be able to generate enough wealth to keep feeding the cycle of buying, selling and construction. The assumption should not surprise anyone.

Construction-led growth is the go-to theory of applied economists who see this as a potent anodyne to the headache of shaking a comatose economy.

Moreover, Pakistan has a hunger for land. From those dreaming of building their small homes to those aspiring to become Rupee billionaires to those wanting to graduate to the trillionaire-club, the land ownership schemes never fail.

When there is such an acute sense of association with a commodity and such an insatiable desire for getting more of it, market forces can be directed to make the supply lines readily available to meet the demand.

But where there is money, big money particularly, there is bound to be controversy and concern. The one big worry that naysaying critics have is that this real estate boom feeds more the rich than the poor.

Also, turbo-speed money making — one road connecting villages with a motorway can bring incredible windfalls as cheap lands become beyond-ordinary reach mouthwatering catches — has its own social costs that lead to big social and political friction.

Some of these concerns are pegged onto real life examples. The government’s much-mentioned ring road project which is expected to benefit of capital Islamabad and the adjoining Rawalpindi has already run into trouble.

Problem of influence peddling

The government itself has taken note of growing reports that housing societies have peddled influence to change the route of the proposed road in order to make their lands goldmines.

While no proof has been found as yet to corroborate the allegations, the humdrum has already cost some of Prime Minister’s closest advisers and ministers much embarrassment as their lands are part of the beneficiary club.

There are other issues as well. Businessmen and tycoons, in a blazing hurry to make use of the real estate bonanza, are using hooks and crooks to expand their businesses.

In the Sindh province, ruled by the People’s Party, local population is up in arms against Pakistan’s largest construction-real estate-and housing network for allegedly evicting disempowered locals from their ancestral lands.

A protest last Sunday turned violent and resulted in setting on fire the main gates of the Authority’s enclave, gutting shops and some newly constructed buildings nearby.

Sindhi nationalists and local groups have vowed to put a stop to land acquisition and upstage the rollercoaster of brick and mortar. This has the potential to become a fair-sized threat to social harmony and political stability because land and language are two red lines in Sindh that someone can only cross at his own peril.

But the real concerns around real-estate centred economic revival is that it not sustainable in the long run; that it generates inflationary pressures; and that it forces a consumption-oriented behaviour which leads to deficits and eats into the savings.

And these, say the critics, are the very reasons that had made the present government go to the IMF in the first place to seek an urgent bailout package (which on account of COVID-19 has been on hold but will be back in place with its stringent conditionalities). But for now in Islamabad, that’s not even a subject of debate.

Everybody is talking real estate only.

Syed Talat Hussain is a prominent Pakistani journalist and writer. Twitter: @TalatHussain12