Is Malik Riaz’s House of Cards about to come tumbling down?

There is something incredibly unassuming about Malik Riaz Hussain. Small, dour, and largely unimpressive he fits more into the image of a property dealer than he does of a property tycoon. In fact scratch that. Even property dealers have a certain annoying relentlessness and snakeoil charm. With the Big Kahuna of Pakistan’s real estate market all you get is stale statements and boring platitudes. 

And that isn’t because Malik Riaz is some sort of media shy, behind-the-curtain, keep-your-wealth-to-yourself, property tycoon. No. Over the past three decades he has built possibly the largest property empire this country has ever seen and become one of its richest residents in history.  All of this he has done with himself at the centre. Malik Riaz is Bahria Town and Bahria Town is Malik Riaz. 

So does that mean if Bahria Town comes crashing down Malik Riaz will come down with it? Over the past few months prices of plots in the new phases of Bahria Town have fallen dramatically. Plots that were worth over 1 crore four months ago are having a hard time finding buyers at Rs 60 – 70 lakhs. On top of this the group is facing troubles in their projects in Peshawar and Karachi where all manners of permits and bureaucratic hullabaloo is stopping them from creating the usual ugly but effective upper middle class communities they have come to be known for. 

The reason behind this sudden downturn? Rumours that Bahria Town is in fact on the brink of default. On the ground property agents and land providers are both concerned that the downturn in the Bahria Town market is the direct result of the gamut of legal problems that the company and its divisive founder are facing. At the core of these troubles are the Rs 460 billion that Bahria Town is supposed to pay to the Supreme Court of Pakistan in a case that also has to do with the Al Qadir Trust that has gripped the nation. 

With a mire of other legal troubles, Malik Riaz and his Bahria Town are facing perhaps their biggest challenge ever. If the group defaults, it will affect a company that employs more than 35,000 people. On top of that, what will become of the massive Bahria Town projects all over the country. Will they fall to disrepair? Will their value plummet? Or will Malik Riaz slink through for all to be hunky dory once more? 

To understand the current scenario, it is necessary to take a look at just what got Bahria Town in this mess in the first place. 

Reliable origins 

There is simply one thing that sells more than anything else in Pakistan’s real estate market: Reliability. As we’ve covered numerous times before in Profit, there is an entire army of reasons behind why Pakistanis invest so heavily in real estate (in particular residential real estate) and why it isn’t a good idea. You can read some of our earlier investigations to understand that. But the reality is that anyone with money will think of buying a plot as a very safe bet both to park their money and to get a good return. 

As a result there has been a massive proliferation of the concept of the “housing society.” Pick up a rock anywhere near Pakistan’s big cities and you will probably find the office of a real estate agent that will try to sell you plots in all manners of societies named Something Gardens, What’s-it-Villas, or Gimmick City. What they sell you is simple: Buy a plot for cheap in what is currently a wasteland and we will develop it into an operational housing society. And not only that, even if you don’t want to live here, you can buy a plot now and sell it later for a profit once the society is developed. 

But these real estate projects rarely take off. They more than happily take investments and then fall prey either to over ambitious plans or permission issues. In all of this, the money of investors is indefinitely frozen. That is why the average investor’s priority when looking at real estate is finding it in societies that are reliable. The prime example of this reliability is probably the Defence Housing Authority (DHA) because of its transparent processes and the fact that it is run by the Pakistan Army. 

But perhaps a close second has been Bahria Town. Interestingly enough Bahria Town was also originally a military foray into real estate. Malik Riaz started the project in partnership with the Pakistan Navy which later backed out. But as the result of a court decision, Malik Riaz got to keep the “Bahria” name. That is actually what gave the project some of its early reputation. But it quickly became clear that Malik Riaz had a knack for both acquiring land and developing it. In the early days, in particular with Bahria Town Lahore, his pitch was there would be no load-shedding in this society. In the dark days of the 2008 energy crisis this was a big selling point. 

On top of this Bahria’s transfer mechanisms were simple yet ironclad and the society developed a reputation for being reliable. Quickly it spread beyond Lahore and Malik Riaz became one of the largest land developers in the country. There were, of course, controversies. From accusations of bribing media persons with plots to land grabbing and fraud there was plenty about Malik Riaz himself that made him a divisive figure. But through this all Bahria Town remained clean. This was largely because none of their projects faced any issues as a result of the controversy created by Malik Riaz. 

That is until now. 

Declining fortunes 

There are a few things happening at the same time right now with Bahria Town. For starters, the real estate market in Pakistan is generally on the downturn. Inflation is at an all time high, people don’t have money, and the appetite to both invest and construct is in the doldrums. As a result, Bahria Town’s projects are also seeing a dip. 

Now the two main ones that are ongoing are Bahria Town Peshawar and Bahria Town Karachi.  On top of the declining market both of these projects are facing serious risks. Bahria Town Peshawar, for example, has not received an NOC or permission to conduct business at their project location. Normally this is something that happens to very small scale projects. But in this case Bahria Town had marketed the project despite not receiving the NOC and their agents had collected investments as well. Now that the NOC has still not been received, all of those payments remain frozen. The investors are running after the agents and the agents have now been very openly complaining against Bahria Town and Malik Riaz — something unheard of until a couple of years ago. 

Since the land in Peshawar where Bahria Town started its residential project was disputed, the project has practically been shut down. Many people booked plots for this project and paid money to the Bahria Town administration through different property dealers, but now they too are worried and uncertain about the future of this project.

The reputation of the Peshawar project can be gauged from the fact that the district administration of Peshawar has filed a case against it, in which Malik Riaz is named. Therefore, if we talk about the Peshawar project, Bahria Town’s project there has failed miserably. All kinds of development work on this project have stopped.

Profit has heard from within the walls of the Bahria Town HQ that a similar situation is brewing at the site for their ambitious Karachi project. And the reasons behind the Karachi project is that pesky sum of Rs 460 billion that has become a thorn in the foot of Bahria Town. 

Legal situationer

So here is what we have. There is a downturn  in the real estate market. Bahria Town’s Peshawar project has been grounded. The land for the Karachi project is disputed in a highly watched and politicised case of the Supreme Court. So how did we get here? 

It starts off in May 2018. Supreme Court Justice Ejaz Afzal Khan had written a decision under which the agreement made by the Malir Development Authority (MDA) with the private developer Bahria Town for the exchange of land was declared null and void, and the National Accountability Bureau (NAB) was directed to start an inquiry against Bahria Town and complete it within three months.

Bahria Town had acquired 16,896 acres of land from the MDA in exchange for land near Dadu and started a large housing project on it. Former Chief Justice Saqib Nisar asked Bahria Town to pay one thousand billion rupees and when NAB started action against Bahria Town following the Supreme Court’s decision, Bahria Town filed a review appeal against the Supreme Court decision in June 2018.

Bahria Town made a counter offer and the Supreme Court accepted that instead of Rs 1000 billion they would pay Rs 460 billion to be deposited to the Supreme Court in seven annual instalments. It was also stated that if Bahria Town failed to deposit two consecutive instalments, it would be considered a default.

The default part of the equation 

This is where things get tricky for Bahria Town. So far the company has only deposited Rs 65 billion of this in the Supreme Court. This is because the hearing of this case was resumed again on the request of Bahria Town in which their lawyers have taken the stance that according to the spirit of the court decision, Bahria Town was supposed to receive 16,896 acres of land but instead received only 11,747 acres. Due to not receiving the full land, Bahria Town stopped the instalment payments.

At least that is what they claim. The only problem is that this Rs 460 billion goes far beyond just this Supreme Court case. You see, outside of this case Malik Riaz and his family had been under a ‘dirty money’ investigation in the UK by their National Crime Agency (NCA). To cut a very long story short, the NCA announced they would be sending 190 million british pounds back to Pakistan. Apparently, as claimed later by the PDM government, this money was returned by Imran Khan’s cabinet to Malik Riaz. In exchange, PDM claimed, Malik Riaz gave Imran Khan and Bushra Bibi land for the Al Qadir Trust. And then this Al Qadir Trust case also became the reason for Imran Khan’s arrest.

All of the details are present in our earlier coverage of the case. But to summarise everything the case behind the Rs 460 billion involves big politics and has left Bahria Town paralysed. That is all on top of a market situation that is incredibly slow and a project in Peshawar that has faced permission issues. 

What could be the reasons for this? The first is that Bahria Town simply doesn’t have the money to pay off this money which is why they are now trying to wriggle out of it. The second reason goes beyond this simple explanation. You see despite all of his earlier legal troubles Malik Riaz has always remained safe from the hands of the law and has been a veritable untouchable in this regard. As many political analysts have told Profit but only on the condition of anonymity, this security has been because he has had a cosy relationship with the powers that be. The recent murmurs are that the property tycoon is refusing to become a wadah maaf gawah in the Al-Qadir Trust Case. 

Look back at how it all played out. Well before Imran Khan was arrested Malik Riaz was summoned by NAB in the case. Even after Khan was arrested, then Interior Minister Rana Sanaullah quite shamelessly avoided mentioning his name, simply calling him “a certain property tycoon.” The feeling was that Riaz, who has always been on the right side of the establishment, would simply become a state’s witness in exchange for leniency in the case which has him implicated too. Except he might have refused to do that, which is why he has been caught in the crosshairs. 

Since all of this has unfolded, Malik Riaz has left the country. He first went to Dubai where he still felt unsafe and went to an undisclosed location in Europe. Investors and agents within Bahria Town are getting antsy. The rumours are spiralling about him having taken a German citizenship and sold most of his major properties in Pakistan. At the same time he has also started trying to set up a media house in Dubai.  

According to the same sources, no one is currently looking after Bahria Town Karachi either. Bahria Town has to pay Rs 460 billion for the land acquired for Bahria Town Karachi, a case which is under hearing in the Supreme Court, and Malik Riaz and the Bahria Town administration are not ready to make this payment in any way. 

The NOC issued by the Sindh government for this project has also been cancelled. Now, if we look at it, the market of Bahria Town Karachi has also been severely affected. A 10-marla on-ground plot, which was easily sold for Rs 1.1 crore four months ago has now dropped to Rs 60 lakhs. 

The same is the case with one kanal plots and commercial plots. On the other hand, those who have on-ground plots, houses, and their possession, their capital is somewhat safe, but those who invested in plot files are in severe danger. Because no one is ready to buy the file of a Bahria Town plot. Currently, there is a common perception among investors in Karachi that perhaps the control of Bahria Town Karachi might go to the MDA in the future.

According to these sources, the Bahria Town case in the Supreme Court and Malik Riaz leaving the country have severely affected the credibility of Bahria Town. That is why no one is currently looking after Bahria Town Lahore and Rawalpindi either.

These sources believed that at this time, the future of Bahria Town was tied to the decision of the Supreme Court. One way to avoid paying the Rs 460 billion is for Bahria Town to declare itself bankrupt. However, these sources claimed that even if the court orders the sale of all assets of Bahria Town to meet the required amount, the value of Bahria Town’s assets would barely be Rs 200 billion rupees. A major reason for this is that some of Bahria Town’s projects are pledged in the bank, but these sources could not provide details of these projects.

Bahria’s stance

The administration of Bahria Town issued a statement in which they labelled the recent rumours as “Malicious Propaganda.” The statement read, “Bahria Town is one of the most prestigious Real Estate brands in Asia, firmly rooted in its commitment to contribute to the progress and economic development of Pakistan. Despite facing malicious campaigns and unwarranted criticism from a misguided faction of the media, we persist in our dedication to serving the nation and delivering world-class projects. Through past challenges, we have weathered adversity, and our resolve to uplift Pakistan remains unwavering. Insha’Allah, this commitment will endure.”

In a recently surfaced audio clip, Malik Riaz is heard refuting rumours and propaganda against him, declaring them to be false. He mentions that since 1996, he has been targeted by various organisations and individuals. However, he expresses his firm belief in the greatness of Allah. He credits Allah for always guiding them and expresses confidence in Allah’s protection over Bahria Town.

Malik Riaz asserts that, with Allah’s blessings, Bahria Town remains secure and continues to thrive. He said that the more attempts are made to suppress Bahria Town, the higher Allah lifts it. He expresses faith that Allah will overcome those who oppose them and will ensure the success and prosperity of Bahria Town. He reassures that Bahria Town is secure and states that their dedication and commitment are entirely for Bahria Town and he is hopeful that Bahria Town will bring transformative changes to Pakistan.

But all the Allah talk aside it is becoming clear that the past is catching up with Bahria Town. Over the past three decades Malik Riaz has built the organisation with a ruthless fervour. He has done so by being able to curry favour with the correct quarters and being in with every politician there could be. His immense wealth and vast connections have protected him. As a result, he has been able to grow and expand Bahria Town. 

Now, Malik Riaz’s personal safety and ability to operate in Pakistan is under threat. As a result, the fate of Bahria Town hangs in the balance. If the organisation were to default it would be detrimental to more than 35000 employees they have. But more importantly than even that, without these employees and the money the company has, their housing societies would fall into disrepair. Considering the size and scale of what they have built, it would be a disaster for many people that have invested in or are living in Bahria Town projects all over the country.