Unlocking State-captured Real Estate – The Case Of Islamabad

Executive Summary

Islamabad has 17,471 public housing units of various categories.

• • (47.7 million sq. ft.) in prime locations.
  • The market value (Zameen.com and w/o rezoning) approximately PKR 2,577.6 billion (USD 9.3 billion).

• Besides these
  • Minister Enclave, Parliament Lodges, and Provincial Houses in the G-5 sector occupy 238 acres (8.5 million sq. ft.) which is equivalent to a minimum market value of PKR 648.0 billion (USD 2.3 billion).
  • Islamabad Club area of 425 acres, estimated minimum value of PKR 2,507.8 billion (USD 9.09 billion).
• The study explores the alternative utilization of this prime land through monetization of housing facilities followed by mixed-use high-rise development on 40 percent of released land.
  • Important note: Monetization means withdrawal of all non-cash benefits while giving the full cash equivalent to the concerned position so that there is no welfare loss to the concerned. But this means that there are no loopholes that allow people to collect the benefit as well as use non-monetary benefits.
  • Estimates suggest that monetization on this principle would cost the federal government an additional PKR 135 to 741 billion annually.
  • With rezoning, i.e. allowing the development of mixed-use and high-rise, the potential investment could be PKR 16,228.8 billion (USD 58.8 billion).
    • In addition, there would be a large and permanent stream of rents and taxes. Crude estimates roughly USD 1.7 billion in rental income and about the same amount in taxes.
  • The development activities will also generate more than 351,000 new jobs, directly and indirectly, in the economy.
• The total opportunity cost of the state-captured land contemporary use is 31,712.4 billion (USD 114.9 billion), which is approximately 34% of the GDP of Pakistan

Table of Contents

1. Selected State-Captured Real Estate in Islamabad. 2
   1. Housing Units for Government Employees – Numbers and Area Occupied. 2
   2. Area Occupied by Islamabad Club and Official Residencies in the sector G-5 of Islamabad   5
2. Market Valuation of the Selected State-Captured Real Estate in Islamabad. 7
   1. Market Valuation of Housing Units for Government Employees. 8
   2.  The Market Valuation Area Occupied by Islamabad Club and Official Residencies in Sector G-5 of Islamabad. 9
3. Unlocking State-Captured Real Estate: An Alternate Utilization of Land. 10
   1. Cost of Monetization of Housing Facilities. 11
   2. Alternate Utilization of Released State-Capture Real Estate. 13
4. The Opportunity Cost of Underutilization of State-Captured Real Estate. 15

Unlocking State-Captured Real Estate – The Case of Islamabad

This paper is a pilot for Islamabad that should be done for all cities. Haque (2007) and Mehmood (2022) have maintained that there is a greater potential for quick wealth generation through local investment as well as some FDI through the huge and suppressed demand for downtown development. Probably, easier and greater wealth to unlock than in minerals that may excite our leadership. The colonial administration had built housing estates for themselves outside our then-cities. At independence, the inheritors of the colonial administration quickly occupied this real estate and sought to expand the practice of grand houses well located and possibly in gated estates. With increasing population, migration to cities, as well as the advent of the car, these estates increasingly came to occupy downtown areas as traffic counts and population increased around them.

Residents of these estates are also in charge of city zoning and management. City zoning, as a result, was held hostage to the need to preserve such housing estates as well as find more space for such housing (Haque 2015). Cities grew around these estates making these areas more and more central. It is for this reason that we feel that this valuable land needs to be unlocked to be allowed to flow to the highest value ((Detter & Folster, 2015; 2017; Prakash & Tanzi, 2000).

 Economics is fundamentally about efficiently using scarce resources (Mankiw, 2001). The growth of an economy hinges on how effectively it utilizes its endowments of land and labor. Efficient allocation of resources means using limited resources in a way that yields the highest returns to the economy among the available alternatives (Detter & Folster, 2015; 2017). Unfortunately, in Pakistan, state-owned land (referred to as state-captured real estate) exemplifies how resources are inefficiently allocated and underutilized.

State-captured real estate can be found almost in all cities across Pakistan that are being (under)utilized to provide housing facilities to government officials, clubs, and grounds, or remain vacant at the prime locations in the downtown areas. Because of this underutilization, downtown areas are not transforming into vibrant commercial hubs as they should be. The zoning rules are tilted to provide excluded areas for the government’s official residents at the heart of the city, which ultimately hampers vertical extension and causes urban sprawl of cities.

However, this state-capture real estate has an immense potential that can only be realized if utilization is carried out through envisioning alternate utilization of this resource (Haque, 2017; Haque, 2021; Haque 2015; Haque & Rizwan, 2020, Aslam, 2023). This report presents the case of alternate utilization of state-captured real estate in Islamabad. Here we tried to map the allocation of state-captured real estate for government employees/official residences, and the Islamabad club. Then we valued these tracks of land as per market rates and later we explored the alternate utilization of this land. We envisioned the development of high-rises on the released land as an alternate utilization.

As per estimates, 17,471 houses are allocated to government employees in Islamabad which occupies an area of 1325 acres, of which only the land is valued at PKR 2577.6 billion. Apart from housing for employees, an additional 663 acres of land is occupied by land for officials (Parliamentarians) housing and entertainment purposes, which is valued at PKR 3155.8 billion. The opportunity cost of the continued provision of the present land use as presented in this report is PKR 31,712.4 billion (USD 114.9 billion).

The report is divided into four sections, section 1 presents the situational analysis and mapping of the selected state-captured real estate in Islamabad. Section 2 provides the market value of the state-selected state-captured real estate. Section 3 presents the case for unlocking it followed by section 4 providing the opportunity cost of the contemporary use in its underutilized form.