Karachi property prices soar after crime crackdown

Published: March 1, 2016
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PHOTO: REUTERS

PHOTO: REUTERS

KARACHI: Abdul Qadeer gave up trying to build a block of flats in Karachi four years ago, when gangsters demanding $20,000 in protection money shot him in the legs because he refused to pay.

Now he is back, putting the finishing touches to one of several apartment complexes he is constructing, part of a property boom which he attributes to the security crackdown on insurgents and criminals launched in the city in 2013.

Karachi emerges leader as real estate sector shines

“The terror in people has been eliminated. Business is good,” he told Reuters, pointing to six scars left by the gunshot wounds.

Qadeer’s experience was not uncommon for those trying to do business in Karachi, home to more than 20 million people and with a reputation as one of the world’s most dangerous cities.

But with recorded crimes down sharply since paramilitary Rangers moved in to make its mean streets safer, property developers across the metropolis are looking to cash in on home buyers’ new-found confidence.

Karachi property prices jumped 23 per cent last year to a record high, outpacing other large cities and the national average of 10 per cent, data from property website Zameen.com showed.

Activists have accused security forces of human rights abuses, while the MQM, Karachi’s dominant political party, says the crackdown is effectively a witch-hunt against it.

PHOTO: REUTERS

In the narrow lanes of Qadeer’s working class Lyari area, the forces killed 200 people last year alone, said Zubair Habib, head of the Citizens-Police Liaison Committee (CPLC).

The police say they are often victims of attacks by armed criminals, and that the operation is working.

The clampdown also has a growing number of supporters, not least among a business community long frustrated by Karachi’s reputation for high rates of crime.

“In those areas where there was a law and order problem, people have started buying houses again,” said Arif Habib, head of one of Pakistan’s largest conglomerates.

Arif Habib Corporation is building a large housing scheme in Karachi, with enough land eventually to accommodate 30,000 units, and last year listed the country’s first real estate investment trust.

“We have the population. There is a shortage of housing and a lot of backlog,” Habib said.

Sustainable boom or a bubble?

Rising demand for property in Karachi may not reflect the Pakistani economy as a whole.

It grew at 4.2 per cent in the year to June 2015, against a central bank target of 5.1 per cent and below the 6 per cent-plus economists say is needed to absorb new entrants into a labour force from a growing population of 190 million people.

Real estate: Karachi and Islamabad markets record modest gains

The central bank said in December that the economy remained structurally weak, with low levels of tax collection, low capital investment and a struggling export sector all posing risks to growth.

At least some of the money pouring into Karachi real estate is also likely to be illicit, property experts said, with some investors seeking to avoid paying tax.

Official data on total property spending are not available, but land prices and project starts show a surge in demand.

Developers launched 134 residential and commercial projects in Karachi last year, up from 106 in 2014 and 72 in 2013, according to Zameen.com.

The 2015 total includes 40 projects stalled during the worst of the violence when rival ethnic groups, Taliban militants and powerful gang lords frightened builders away, despite a severe housing shortage.

Recorded murders in Karachi fell to 650 last year, a 75 per cent drop from 2013, while registered extortion was down 80 per cent and kidnapping by nearly 90 per cent, according to the CPLC, which collates official police data.

Across the city from Lyari, billionaire Malik Riaz is constructing Pakistan’s tallest skyscraper, a 62-floor tower and complex of offices, luxury flats and malls with Arabian Sea views, scheduled to open next year.

Project manager Sajid Usmani said 80 per cent of the apartments had been bought, with prices of 30,000 rupees ($287) per square foot well above the average for high-end Karachi flats.

Still, some developers fear the property boom might turn out to be a bubble.

Crime rate falls in Karachi

In Lyari, rubbish litters pot-holed streets and locals complain about a lack of water, electricity and jobs, signs of broader weaknesses in Pakistan’s economy.

Crime rates could also climb again if the Rangers decide to wind down their lengthy operation.

“If they leave, the same situation will occur,” said Qadeer. “The criminals will come back.”

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Reader Comments (9)

  • Kaleem
    Mar 1, 2016 - 11:27AM

    Just goes to show that crime can do good sometimes.Recommend

  • Rumormonger
    Mar 1, 2016 - 1:23PM

    Several older apartment complexes are being bought enbloc by some big investors. I have read about five public notices of such deals. The plots range from 3000 sq.yd. to a bungalow on main Clifton road (7500sq.yd) that once belonged to a famous banker. What will happen when 40 to 50 story skyscrapers will come up here. Where will the water for the residents come from and where will is the sewage going to go? Recommend

  • IBN E ASHFAQUE
    Mar 1, 2016 - 7:57PM

    @Rumormonger: The city’s next war is on water. After the developers have screwed up Karachi thoroughly they will leave and the people will suffer. Once General Raheel leaves it will be back to normal as no institutional development is being made. All and sundry are encashing the respite from violence in Karachi. Instead of building up Karachi Police or establishing local governance of Karachi……….May Allah guide us all….Recommend

  • Haji Atiya
    Mar 1, 2016 - 8:10PM

    @Rumormonger:
    The initial feed of water will be continuously recycled with the residual waste used for heating the boilers.Recommend

  • sterry
    Mar 1, 2016 - 9:53PM

    @IBN E ASHFAQUE: The developers may be screwing up Karachi but the people are to blame for electing the wrong representatives. Why did it take the Federal government and Army to fix Karachi’s law and order situation or start the Bus Rapid Transit System? Why don’t these problems exist to the same degree in Punjab?Recommend

  • NHA
    Mar 2, 2016 - 1:16AM

    Sure, return of peace has contributed to improvement in property market. The other factor is slump in Abu Dhabi real estate and investors flocking back home and investing in Pak properties. Recommend

  • AFK
    Mar 2, 2016 - 4:54AM

    This is something great and I hope things would better by every passing day. Mega Cily people deserve better tomorrow and trouble free envoirments for volatile commercial activities.Recommend

  • Shehzad
    Mar 3, 2016 - 9:56AM

    I think it’s just a bubble, which will eventually burst.
    The plots and apartments are not worth the price demanded. With no facilities like gas, water electricity and proper sewage prices have shot up but eventually would come down soon.Recommend

  • Mar 9, 2016 - 4:39AM

    Peaceful Karachi is beneficial for Pakistan and its people. Recommend

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