Land scams and half-truths

Legal eye

The writer is a lawyer based in
Islamabad.

The news that the army high command has allowed NAB to investigate land scams involving General Kayani’s brother is welcome. One doesn’t need to be a rocket scientist to know that rule of law in Pakistan dithers when it comes to the high and mighty.

NAB wouldn’t be sending raiding parties to arrest an ex-army chief’s brother if it didn’t get the green light from the present chief. The army chief could have decided that an ex-chief’s brother being linked to corrupt practices could sully the guarded military image or even threaten the ‘morale of troops’. He didn’t. Let’s celebrate these small mercies.

But land scams involving the DHA, and half-page ads reiterating its solemn resolve to stand by purchasers and families of martyrs raise more questions than they answer. The most basic question, raised frequently by fellow columnist Ayaz Amir, is: why is our army in the business of real estate?

Fauji Foundation pooling money to buy chunks of cheap land and using its manpower to develop and distribute plots to servicemen, as a gratuity scheme, is one thing. But should the military be in the business of national security or that of making money by becoming the biggest realtor advertising, building and running housing societies across Pakistan?

Gen Kayani’s brother getting mixed up with shady deals involving the DHA at a time when Gen Kayani was army chief raises a host of thorny issues. How should one view the health of the military’s internal system of checks and balances if the chief’s brother, under the chief’s watch, begins to be awarded construction and real-estate development contracts by organisations that report to the chief? Isn’t conflict of interest writ large over this equation? Would a junior officer be able to hold the contractor’s feet to fire for non-performance if the contractor happens to be the chief’s brother?

Now that we are being told that a bunch of greedy contractors were out to defraud the general public that placed its trust in the DHA and its ‘brand name’, what about those within the DHA administration who granted these contracts? Does the logic of ‘it-takes-two-to-tango’ not apply when it comes to the DHA? If an unsuspecting public placed its faith in the DHA, weren’t they wronged first and foremost by those running the DHA? Why then are we witnessing selective accountability only against civilians who were on the receiving end of DHA contracts?

Here is how real-estate development business generally works. You pick a chunk of undeveloped land and enter into purchase agreements with landowners, firming up the deal by paying a pittance of total land value as down payment. You then put together a fancy advertisement campaign for the public promising to deliver a dream housing community within a couple of years. You begin collecting public money and selling a piece of paper (literally called a ‘file’), which is nothing more than a promise to transfer a developed plot at a future time comprising land you mostly don’t own at the time of sale.

The money collected from people is used partly to purchase the land already sold to them in the form of these files and partly as seed money for the developer’s new projects. Some of the original landowners, still unpaid, refuse to complete the sale as they realise that the value of their land is much higher than what they are receiving. This creates pockets of land with adverse possession within the promised scheme and delays development. Those who have purchased files on a lump-sum basis are stuck. Those paying instalments are also stuck with no option but to throw good money after bad.

Meanwhile, the price of land jumps up. The purchasers get more desperate. The developer begins settling land issues and imposes hefty ‘development’ charges to work the land underlying the ‘files’. The purchasers, after years of waiting, can either have their files cancelled and sold to new buyers on higher current market value, or dish out the new charges being demanded. With no leverage, no state support and no relief expected from courts, most pay up. Breach of trust and abuse of public funds is part of this business model. And none of this is a secret.

Is the DHA running its real-estate development business any differently? Isn’t it true that the DHA sells out files to the public-at-large and then doesn’t deliver developed plots for years? Isn’t it true that years after sale of files it imposes forbidding additional charges for development? If people are to pay separately for development of their plots, are they paying the price of undeveloped rural land when they buy expensive plots or files in the first place? If Eden and Elysium are guilty of taking public money and not delivering developed plots at the promised time, is the DHA not guilty of the same in schemes it hasn’t outsourced?

So what is Eden and Elysium’s crime? Are their owners being hauled up for their audacity to defraud the DHA as opposed to ordinary people? Does NAB apply some definition of corrupt practices whereby identity of the affected party is an integral component of the offense? In July 2015, NAB advertised in self-congratulatory fashion that it had accepted voluntary return application by Al-Hamra Avenue (Pvt) Ltd (an Eden project in Islamabad) and “realized the recovery of 1832.168 million”, payable to Shaheen Foundation as repayment of the Rs1,258 million received from it against sale of land and Rs573 million as profit.

And how did Eden manage to pay the initial instalments in lieu of this deal? It was allowed to run a massive national ad campaign to sell plots for Eden Life Islamabad to the public-at-large – ie sell to unsuspecting new purchasers plots previously sold to Shaheen Foundation (which weren’t developed and delivered despite the passage of nine years since the first sale) and pay Shaheen back from the funds collected from new purchasers. Was Al-Hamra barred from running a fresh advertisement and sale process after it had admitted its crime in relation to the same parcel of land? No.

Did the CDA as a public authority, and as Islamabad’s land regulator, do anything to protect the public from being duped? It took out an insignificant ad in a newspaper saying people who invest in unauthorised schemes do so at their own peril, and placed on its website a list of the names of dozens of unauthorised schemes – including Eden’s. Meanwhile, a massive ad campaign of Eden Life Islamabad ran on TV channels and newspapers across Pakistan. This campaign probably generated anywhere between Rs1 billion and Rs2 billion. And so the merry-go cycle went on, dare one say, with the participation of our NABs and CDAs in one form or another.

The thing about rule of law in Pakistan is that we have reduced it to a joke. The selective accountability process being run by NAB against Eden and Elysium will do nothing. At best it will arm-twist the owners of these joints to cough up profits accumulated from this and other projects, payoff DHA Lahore and message the egos of those at the helm of the DHA today. But what about the affectees of other projects run by Eden and other developers? What about the affectees of the DHA’s own projects?

If the state is serious about protecting the hard-earned money of ordinary people who dream of owning their own homes, we need regulation of the real-estate business. The state needs to ensure that no developer can advertise a scheme unless it owns clear title to the underlying land, that funds are collected from the public pursuant to prospectuses (like those issued by public listed companies raising public funds) making proper disclosures and listing terms that are enforceable under law, and that public funds are ring-fended and can only be applied for development of the scheme and not diverted to other uses.

Email: sattar@post.harvard.edu