Real estate: How the Arsalan Iftikhar case affected Bahria Town

While the scandal was damaging, the company was able to use it to its advantage.

KARACHI:

Bahria Town may have been accused of having several questionable business practises, but its chairman, Malik Riaz, certainly knows how to handle reputational risk: the real estate development company, one of Pakistan’s largest, was able to recover within months from the hit to sales during the Arsalan Iftikhar scandal in large part due to its heavy blitz of advertising.

The Supreme Court case surrounding corruption allegations levelled by Riaz – implicating both himself and the son of Chief Justice Iftikhar Muhammad Chaudhry, Arsalan Iftikhar – brought to light Bahria Town and the many questionable business practises of the company. But while the episode may have temporarily dented interest in Bahria Town properties, it did not have a measurable impact on prices, according to data compiled by Zameen, Pakistan’s largest online real estate database.

Zameen used the percentage of searches on its website regarding Bahria Town as a proxy for interest in buying property developed by the company, which allowed them to be able to control for seasonal variations in interest as well. For price data, they used final listing price data for every property listed on their website. The results of the analysis present an interesting picture.

During the first five months of 2012, interest in Bahria Town properties, particularly in Lahore, was steadily rising. Then, as the Supreme Court began hearings into the corruption allegations in June, interest plummeted. As a percentage of the total volume of traffic on Zameen, Bahria Town’s share shrank from 5.48% to 4.53% within one month.

“While that difference does not sound like a lot, it represents thousands and thousands of clients moving away from Bahria Town,” said Shaista Zulfiqar, a marketing manager at Zameen.

The data corroborates Zulfiqar’s view. The number of unique searches for Bahria Town on the website went down by almost 23% between May and August of this year.

But there was another interesting, and somewhat counterintuitive, trend that Zameen found in its data: even at the height of the corruption scandal, when Bahria Town’s name was associated with unethical and illegal actions on the nightly news every day, prices for many Bahria Town properties – especially in Lahore – remained relatively steady and recovered strongly soon after the scandal was no longer dominant in the news.

This is not to say that some properties were not badly affected. Dawn reported that Bahria Enclave in Rawalpindi saw prices plummet by as much as 20% during the height of the scandal. But the more established of Bahria Town’s projects and properties appear to have weathered the storm rather well. Prices appear to have fallen by an average of around 1.7% for the Lahore developments, and by September had rebounded to even higher than their pre-scandal levels.

And interest in Bahria Town properties now appears to have also crossed its pre-scandal peak, touching 6.74% of total searches on Zameen in October so far. “It is an astounding figure which represents that the rise in people’s interest in Bahria Town is almost twice as much as the setback it suffered in July,” said Zulfiqar. “Such a quick recovery says volumes about Bahria Town’s strength as a truly outclass project which came out of the mammoth controversy literally unscathed.”

Part of that resilience appears to have been the result of a massive advertising blitz that Bahria Town launched at the height of the scandal. It was often ironic to watch advertisements for Bahria Town properties on several news channels in the middle of a programme detailing allegations of the company’s questionable practises in creating those developments in the first place.

While that sort of marketing spree may be seen as brazen by some, it appears to have worked: prices for Bahria Town properties in Lahore are up by an average of 10.6% between May and August of this year. He may have been maligned in the media, and perhaps justifiably, but Malik Riaz and Bahria Town appear to be having the last laugh in the Arsalan Iftikhar scandal.

Published in The Express Tribune, October 23^rd, 2012.