The Real-estate Monoculture

Pakistan’s unchecked real-estate sector is swallowing resources and land, driving up property prices while stifling growth in manufacturing and technology.

Unlike its neighbours, Pakistan’s wealthiest individuals are heavily invested in real estate, rather than in innovation or industry. This has significant consequences for wealth distribution and economic health.

In South Asia, India’s top 10 billionaires have a combined net worth of almost $400 billion, with the 100th wealthiest holding about $2 billion, spanning industries like technology, healthcare, and manufacturing. None of them is primarily tied to real estate.

In stark contrast, Pakistan’s richest individuals derive their wealth from land speculation. This concentration of wealth in an unproductive sector highlights the lack of investment in sustainable industries like manufacturing, agriculture, or technology, raising concerns about the country’s economic planning.

Decades of poor economic choices have deepened this problem. The nationalization of industries in the 1970s stifled industrial growth, while loans amounting to $12.5 billion, spent on flashy infrastructure projects, failed to boost manufacturing or exports. Instead, the economy has become reliant on real estate, and the outcome has been disastrous.

Property prices have surged, making homeownership unattainable for low- and middle-income families, exacerbating economic inequality and fueling social unrest. The dominance of real estate has also siphoned resources away from other vital sectors, preventing economic diversification and making the country vulnerable to a potential real-estate crash.

Property prices have surged, making homeownership unattainable for low- and middle-income families, exacerbating economic inequality and fueling social unrest. The dominance of real estate has also siphoned resources away from other vital sectors, preventing economic diversification and making the country vulnerable to a potential real-estate crash.

The sector’s opacity has fostered corruption and money laundering. Transparency International consistently ranks Pakistan poorly on the Corruption Perceptions Index, largely due to unregulated property transactions. Illicit funds flow into the market, inflating property values, and driving away legitimate investors, further hindering economic growth and diversification.

Environmentally, Pakistan’s real-estate obsession has been catastrophic. Deforestation rates are among the highest in the world at 1.5 per cent annually, according to World Bank data. Agricultural land is rapidly shrinking, jeopardizing the country’s food security. Cities are expanding into farmlands, and unplanned developments are blocking natural waterways, leading to urban flooding, as seen in Karachi’s 2020 floods.

Environmentally, Pakistan’s real-estate obsession has been catastrophic. Deforestation rates are among the highest in the world at 1.5 per cent annually, according to World Bank data.

Despite an escalating water crisis, fresh water is recklessly used in construction rather than treated sewage, as is common in other countries. Over 21 million people lack access to clean drinking water, yet precious resources continue to be squandered on unsustainable real-estate projects. Traveling across the country reveals the relentless spread of housing developments, with new colonies springing up along highways, ravaging green spaces, and exacerbating the risk of climate disasters.

This over-reliance on real estate is unsustainable. The sector’s dominance diverts resources from manufacturing and technology, preventing economic diversification and long-term growth. Corruption and money laundering also distort the economy and erode public trust.

Despite an escalating water crisis, fresh water is recklessly used in construction rather than treated sewage, as is common in other countries. Over 21 million people lack access to clean drinking water, yet precious resources continue to be squandered on unsustainable real-estate projects.

For Pakistan to break free from this destructive cycle, it must shift toward economic diversification. Manufacturing, technology, and agriculture hold the potential for sustainable growth and job creation. The government must introduce policies that encourage investment in these sectors and curb rampant speculation in real estate.

Corruption in the real-estate sector must also be tackled head-on. Implementing stringent anti-money laundering measures and improving transparency in property transactions are crucial steps toward restoring investor confidence and stabilizing the market.

Pakistan’s fixation on real estate is widening the gap between the rich and poor, while undermining its long-term economic viability. The environmental toll, shrinking agricultural land, and unsustainable reliance on speculative investments paint a bleak future.

(The writer is the founder of the Clifton Urban Forest. He tweets/posts @masoodlohar and can be reached at: [email protected])

Originally published in Daily The News International, Karachi ono 16 September 2024