Real Estate is a very profitable investment in Pakistan, provided one knows what to buy when, have some holding power and sell at just the right time. The returns are very handsome; over 100% in some cases. There are protections and lack of oversight like no other. No wonder, it is a popular parking place for undeclared money, which is a vehicle of investment that not only hides such wealth but multiplies it as well. And then there are the periodic amnesty schemes announced by every new government attempting to address its fiscal woes.
However, there are also a plethora of fancy real estate projects that have turned out to be, to put it mildly, bad investments. That is not to say none of them had the intention of actually building and delivering what they had marketed to their clients within the stipulated timelines and quality standards. But there are some worrying examples of projects that have failed to do that, often with an intent to defraud customers. One such example, that has recently come to light as a result of an Federal Investigation Agency (FIA) investigation, is the Creek Marina Project.
A promising start… at least on paper
According to an FIR submitted in Darakhshan police station in Karachi back in 2014 by Secretary DHA Karachi, Brig (Retd) Inam Kareem, in September 2004 an individual named Shahzad Nasim approached DHA Karachi, claiming to be the Managing Director and majority shareholder of Meinhardt, Singapore, a Singapore-incorporated company.
Nasim expressed his interest in establishing the Creek Marina Project at DHA Phase-VIII Karachi for public sale, with DHA going into an agreement with another one of Nasim’s companies, Marina Services Private Limited (MSPL).
The agreement was signed on September 27, 2004, laying the foundation for an ambitious development—an impressive high-rise residential and commercial complex situated on prime waterfront land in Phase VIII of DHA.
According to the key points of the agreement, DHA agreed to transfer approximately 92,000 square yards of waterfront land to MSPL. In return, MSPL was to allocate 15% of the net floor area of the Creek Marina Project to DHA. The responsibility of designing, constructing, marketing, and developing the project was entrusted to MSPL.
Initially, the project envisioned two high-rise towers. As time passed, the project’s scope expanded, leading to the addition of more towers. To facilitate its execution, MSPL was required to establish a special legal entity (SPV) registered both locally and abroad. This agreement marked the beginning of the Creek Marina Project and established the framework for its development.
The project emerged as a promising endeavour. It boasted ‘luxury living on a waterfront development’ in the Karachi metropolis. It aimed to create an iconic landmark showcasing sophisticated architecture. Its vision revolved around transforming the picturesque waterfront into a property that set new standards for upscale living in Karachi. Nestled in Phase VIII of DHA, residents would savour breathtaking views of the Arabian Sea and the city skyline. At the heart of the project were the sleek high-rise towers.
State-of-the-art amenities, spacious apartments, private terraces, sky lounges, and rooftop gardens promised an ‘unmatched living experience’ was all promised. Furthermore, the project aspired to become a vibrant community hub, featuring high-end retail outlets, fine dining restaurants, boutique shops, and recreational facilities.
Moreover, the project was perceived as an economic catalyst, injecting fresh investment and employment opportunities into the local economy. The partnership with DHA added trust and credibility, attracting discerning buyers and investors seeking waterfront living at its finest. The developers emphasised their commitment to timely delivery, setting a nine-year timeline to complete the development by 2013. The excitement and anticipation from the city’s elite and real estate enthusiasts was promising.
According to the FIR, Nasim was able to collect ‘Rs 3,000,000,000 from the public’ for the project. Details on who these investors and buyers were is unknown.
As the project progressed, unforeseen challenges and controversies arose, casting shadows on its path. Allegations of financial impropriety and suspicions of money laundering, along with disputes with investors, threatened the future of the Creek Marina Project, leaving its future uncertain and the project entangled in legal complexities.
Complex corporate structuring and allegations of fraud
As per documents present with Profit, on the 16th of May 2023, Muhammad Mouz Ahmed Lone, submitted an application to the Federal Investigation Agency (FIA) revealing diverse and expansive detail of alleged fraud on part of the Creek Marina Project that affected him and other victims.
According to Lone’s application, the corporate labyrinth surrounding the Creek Marina Project was intentionally designed to deceive and obfuscate, employing numerous layers of companies and offshore entities to facilitate fraud, money laundering, and evade accountability.
This is where matters get a little confusing, seemingly intentionally.
Shahzad Nasim was the Managing Director and majority shareholder of Meinhardt, Singapore whose other company MSPL got into an agreement with DHA Karachi, but according to Lone’s application, at the heart of the project was Creek Marina Private Limited (CMPL).
CMPL, the seemingly local company, would be responsible for executing the ambitious project to develop high-rise towers on sought-after waterfront land. However, the ownership of CMPL remained shrouded in mystery.
Adding to this complex structure of corporate ownership, Lone’s application makes reference to records maintained with the SECP (Securities and Exchange Commission of Pakistan), which show that CMPL was nearly fully owned by a company named Creek Marina Singapore Pte Limited (CMSPL), an offshore entity registered and operating in Singapore.
The CMSPL itself was entirely owned by Swiftearn Holdings Limited (SHL), an entity nestled in the secretive off-shore company sanctuary of the British Virgin Islands.
As each layer unfolds in the application to the FIA, the true beneficiaries of the Creek Marina Project become increasingly obscured from public view. The offshore secrecy afforded by CMSPL and SHL seemingly also provides perfect cover for concealing the identities of the actual owners. Allegedly, the accused parties exploited the confidential nature of offshore jurisdictions, engaging in money laundering through hawala/hundi and other untraceable channels to clandestinely transfer funds across borders.
Necessary amendments
Lone’s application also stated that the DHA made multiple amendments to the original agreement with MSPL. These amendments were necessitated by various changes and developments in the Creek Marina project and its execution. An addendum to the original agreement of 2004 was signed between MSPL/CMPL and DHA in July of 2005. This brought about several significant changes to the original agreement. Notably, it expanded the scope of the project to include eight high-rise towers, each with 27 floors, instead of the initially planned two towers. Additionally, the project completion was divided into two phases, with Phase 1 (four towers) to be completed by December 2008 and Phase 2 (four towers) to be completed by December 2009.
DHA and Creek Marina entered into a first amendment to the contract in 2005, which outlined a two-phase project plan involving the construction of two towers instead of one. Following the agreement’s amendment, DHA proceeded to sub-lease 99 acres of land under the name Creek Marina Pakistan. However, despite these changes to the contract, the project remained incomplete.
A second amendment to the agreement was executed between DHA and Creek Marina on June 4, 2009. According to this revision, CMPL was obligated to pay Rs 12 Billion to DHA, and the net floor area was to be reduced from 15% to 3.75%. Under the terms of this new agreement, the project was to be completed in three phases. Creek Marina was responsible for finishing the first phase by June 2011, the second by December 2011, and the third by June 2012. However, the company failed to meet these deadlines.
One last push?
According to Lone’s application, the project encountered severe delays, and despite CMPL having undertaken no work, DHA agreed to amend the main agreement once again. This required a second addendum, signed in June of 2009, introducing one significant change: allowing CMPL to collateralize the 92,000 square yards of waterfront land with a bank.
According to documents available with Profit the intention behind this allowance made by the DHA was to regain some control and oversight over cash flow and accounts of the project.
The collateralization was to be done phase-wise, with MSPL/CMPL first committing 30% of the estimated cost of each phase and the loan could only be drawn down as per the agreed upon construction schedule.
Additionally, CMPL would open an Escrow Account with a commercial bank with minimum “AA” rating with clear understanding that the bank will act as an “Escrow Agent” as intended under the Agreement dated 27 September 2004. Evidently this part of the agreement was never fulfilled by CMPL in 2004, necessitating DHA attaching it as a condition to the collateralization.
Another clause that was seemingly ignored by CMPL in the original agreement was the appointment of ‘Renowned Chartered Accountants in consultation with DHA to verify/audit the cash flows both in and out of the Escrow Account as well as existing accounts’. DHA reiterated this in the 2009 addendum.
The 2009 addendum also made it mandatory for all money coming from new bookings to be deposited in the newly established escrow account with its account number for deposits printed on application forms.
It also made it compulsory for an independent engineering consultant to be appointed in consultation with DHA and the banks to certify payments to the contractors.
These efforts would ultimately prove futile however. As per sources in DHA, the construction on the project came to a halt in 2010.
FIA investigation
Contrary to Lone’s assertions, both FIA and NAB have been unable to definitively confirm the involvement of Creek Marina’s owners in money laundering. Nevertheless, the documents received by the FIA clearly indicate that upon acknowledging the complaints from the victims, an investigation against the owners of Creek Marina has been initiated.
In June of this year, the FIA Commercial Banks Circle issued notices to the owners and stakeholders of the Creek Marina Project as well as various banks. A copy of the notice addressed to Naseem Ansari, Chairman of Creek Marina Singapore Limited.
As for Shahzad Nasim and his son Omer, the FIA has attempted to contact them but to no avail. Sources at FIA have confirmed that a letter will also be written to Interpol to track the accused, as there is so far no trace of them in Pakistan.
As per an official of the FIA, the investigation is still ongoing, and the implicated individuals and banks are expected to cooperate fully with the authorities. While the FIA has initiated this investigation based on allegations and evidence presented, no conclusive confirmation of money laundering involving the owners of Creek Marina Singapore Ltd has been established as of now.
It remains to be seen how the investigation will unfold and whether further actions will be taken based on the evidence gathered during the course of the inquiry.
Funnily enough, Creek Marina’s website is still up and functional. The list of team members has Nasim listed as the Group Executive Chairman with an unmissable “THE MASTERMIND” superimposed over the profile.
Redressal? Unlikely
Buyers in this predicament are plentiful across Pakistan as many projects showing similar promise have either come to a halt or were abandoned. The recent economic downturn leading to higher prices and import restrictions have only exacerbated the situation, making it difficult for developers to deliver projects on time. Profit did a detailed story analysing the new dynamics of the real estate market a few months ago, pointing out the difficulty some projects are facing.
For any project to begin, developers have to get necessary approvals leading to a ‘No Objection Certificate’ (NOC) from the relevant development authority to begin advertising and constructing a particular project.
However, according to Lahore Development Authority (LDA) spokesperson, Osama Mehmood, this stipulation is regularly violated.
“It’s a fact that a large portion of housing projects proceed without obtaining necessary approvals from the relevant authorities. These ventures engage in business without fear of consequences. In such instances, LDA and other development authorities in the country alert the public. We periodically update lists of unauthorised housing projects through advertisements and our website, explicitly advising the public to refrain from investing in such projects.”, he commented.
Developers, preferring to remain anonymous when speaking with Profit on the matter, however argue that the regulations are overly stringent, making it arduous for them to satisfy the numerous legal prerequisites mandated by development authorities or the government. Moreover, even if a developer manages to meet all these regulatory requirements, the red tape prevalent in most regulatory authority offices and the ‘methods’ to bypass them become hindrances in doing things ‘by the book’ and in a timely manner.
Mehmood argues that the regulator can only do so much; the buyers also have to be cautious.
“It’s imperative for developers to adhere to stipulated regulations for projects, regardless of whether they involve high-rise buildings, residential spaces, or commercial properties. But the public should thoroughly evaluate all available information pertaining to the project before making an investment,” he said.
One would imagine that the requirement to get an NOC from a development authority would be enough of a disincentive to anyone looking to make a quick buck. Evidently not. As per an official at DHA, Creek Marina never had to go through many of the procedural requirements that most other projects had to because it had the backing of DHA Karachi, which was providing the land.
All this introduces excessive risk to the equation and discourages future genuine buyers, those who want to buy a home and build an asset over time with their life savings, to stay away from projects such as Creek Marina and similar largescale fancy projects whose bonafides are hard to establish when making the initial investment.
In 2016, India, in an attempt to address the same issues with its real estate development sector, established RERA (Real Estate Regulatory Authority). It was welcomed by the country’s homebuyers as a much-needed reform measure to make investments in real estate projects more secure.
For example, it introduced rules for developers that included builders having to put up 70% of the money they received from customers in a bank account separate from the construction company’s account that could only be used for construction purposes. Additionally, in the case of any delays, customers would receive payments as per a monthly interest rate against the money in the account.
Pakistan tried something similar. Enacting the ‘Islamabad Real Estate (Regulation and Development) Act 2020’, which led to the formation of the Islamabad Real Estate Regulatory Authority (RERA).
The authority enforces regulations that prohibit developers from selling properties without obtaining necessary approvals. Developers are obligated to demonstrate clear land ownership and present a comprehensive history of project delivery. Property sales are only allowed to be conducted by real estate agents registered with the authority.
Developers are also required to furnish regular updates to buyers, showcase plans and obtained approvals, and refrain from accepting advance payments. RERA (Pakistan) restricts the transfer of project rights without the consent of the majority of allottees, and provisions are in place to ensure refunds for projects left incomplete or burdened with debt. Allottees are granted possession rights along with project maintenance oversight.
All this is very similar to the Indian RERA, both in terms of text and implementability. As per Indian news outlets, India’s RERA act has not yielded the desired results. It has struggled to ensure the punctual completion of ongoing projects, and buyers who had invested in such projects to secure homes have encountered the same difficulties.
One fatal flaw of RERA was that it was at the end of the day a non-judicial body, requiring the local administration of wherever a case was registered to sign off on the execution of orders.
Only ten percent of projects have reached completion, and there has been no noticeable increase in the number of home buyers.
Matters are much the same in Pakistan. No amount of laws will effectively address the problems at hand unless effective implementation is ensured.
Those who bought it, literally and figuratively speaking
The affected allottees have formed an action committee, the Creek Marina Action Committee (CMAC). have sought redress and the apprehension of Dr. Shahzad Naseem, Omar Shahzad, and other involved parties. They have made appeals to Prime Minister Shahbaz Sharif, the Army Chief, and the Karachi Core Commander, urging them to ensure justice and take decisive action against those implicated in the alleged crimes.
As per Lone’s application, the National Accountability Bureau (NAB) took note of the complaint filed by members of the Creek Marina Action Committee (CMAC) and initiated inquiries into the alleged financial embezzlement and fraudulent practices within the project. During the investigations, the NAB and other authorities uncovered questionable deals and irregular financial transactions within the project’s corporate structure.
Those who paid millions in booking fees and regular payments and never saw an inch of the property they were promised are understandably angry, frustrated and seeking some justice. That same money could have easily been sitting in a capital secured savings account in any bank of the country earning a healthy return.
But the fact that the project began almost two decades ago and was abandoned thirteen years ago, there is a plethora of evidence to sift through and make sense of by the FIA. This coupled with a very sluggish judicial system means any justice will take time to deliver.
