Greedy land developers want Pakistan’s agricultural land. Could the Supreme Court hold the answer?

Pakistan has far too many housing societies. Take a drive around Lahore and its outskirts and you’ll see exactly what we mean. It seems at times that at every corner, every turn, every bus stop there is a new one. An endless expanse of residential real estate projects with names like XYZ Cooperative Society, ABC Gardens, 123 Villas, Al-Something-or-the-Other Town, and Mountain/River/Ocean City. 

And this isn’t just the case in Lahore or other large urban centres. All around the country ridiculous amounts of money have been pumped into real estate projects that have very little economic or social utility. The reason it has been so easy to do so is because for decades the business of land in Pakistan has operated like the Wild West. Developers have followed set strategies that have allowed them to acquire, market, and sell land as real estate projects with seemingly very little regulation. It has been absolutely free for all. 

Until now. The party, our dear real estate developer friends, might finally be over. During the proceedings of a recent case regarding the land for a housing society in Rawalpindi, a three member bench of the Supreme Court of Pakistan (SC) expressed shock over “flagrant violations” of the law committed in the acquisition of the land for the housing project nearly 20 years ago.

The case in particular being heard by the three-judge bench headed by Chief Justice Qazi Faez Isa emerged from complaints moved by a number of people who were deprived of plots despite making payments in the society. Surprisingly enough what irked the court more than the complainants was the acquisition process through which the project got its land. Apparently, the land being developed had been “converted” from agricultural to real estate. It has been a common enough practice within real estate development over the decades, but one that has come under scrutiny. 

A decision is still some ways away in this particular court case. But one important development has been that the SC has framed a list of eight questions that will determine what the conditions are to use agricultural land for non-agri related commercial activities. These questions could become central to what regulates and rules how land acquisition and transfer processes work. Essentially, it might mark the first time real estate developers really have to contend with serious restrictions in starting such projects. But to really understand and get to the bottom of what this means, we need to start at the beginning. By looking at the process of how these societies come into existence in the first place. 

Residential real estate galore

Without getting into the intricacies of why Pakistanis invest so heavily in real estate and whether or not that is a good idea, we can safely say that real estate investments have worked out for money. A few years ago Profit compiled an index to show average returns across asset classes in Pakistan from January 1, 1999 through the end of June 2020. What we found was that real estate was the third-best performing asset class available to ordinary Pakistanis, behind the stock market and gold.

Take, for example, the Defence Housing Authority (DHA) — an organisation that is synonymous with residential real estate in Pakistan. The first and the oldest DHA in Karachi was initially a private housing society formed in the 1950s. In the decades since it has gone from going under the control of different core commanders to being institutionalised as an Act of Parliament. Over time owning a plot in DHA has become almost an aspirational matter. People save their entire lives to buy plots here and secure their investments. And over time, DHA has expanded. 

Lahore, for example, is now on to its ninth phase of DHA where development has taken place and people are using it as a residential area. They have also done extended projects such as DHA Rahbar, which itself is on its fourth phase. In fact, DHA represents a whopping 25% of Lahore. What was initially 34000 kanals has now been stretched to cover a whopping 3 Lacs 12000 kanals.

This success has been replicated. As a result far too many have tried to become real estate developers. The only problem with this is that land is limited and the developers seem to be unlimited. Now, normally the process of land acquisition is quite clearly set out. Before a developer can apply for an NOC for a project, they need to submit their documents to the relevant development authority (the RDA in case of Rawalpindi for example). For this, the first step is that they need to have land. 

In case a person already possesses land and wants to construct a project on that the process is pretty simple. But if an investor is coming in from the outside, they need to find a way to acquire this land. The correct procedure is to approach a land provider who negotiates with local landowners in the area. These can be both private land owners as well as different government departments that might have land in this area. The developer can purchase this land, which is supposedly unproductive, either in exchange for cash or as a barter agreement. What this means is that a developer could say to a land owner that he will take 2 acres of his land off his hands, develop it and return it to him in the form of a 2 Kanal plot that will be worth a lot more than the barren land he currently has. 

Once this process is complete, the developer creates a masterplan. This is privately owned town planning essentially. They need to create maps, blueprints, identify roads, sanitation, electricity infrastructure as well as figure out population requirements like how many hospitals, schools, shops and other such places are needed. These plans are then submitted to the relevant authority which gives the developer and NOC and they begin marketing and selling their project. 

Fraud aplenty and court interventions

But this is rarely ever how it goes. Acquiring this much land is an expensive and risky business. Usually when a developer launches a new project they don’t want to go all in on it by buying the required amount of land. What they do then is go on a marketing campaign in which they announce a new housing scheme, often getting celebrity endorsements and pasting huge advertisements all over the cityscape. They sell people files, certificates, and all manner of marketing gimmicks that make them think they are buying a plot in the future when in fact they are at best placing a bet on the success of said project.

What they are doing instead is getting together enough capital from these ‘advance bookings’ to actually be able to buy the land required for the project. The people investing are told their plots are still in the development stage and they will only be told where their plot is once the technical aspects of mapping and zoning are figured out. The truth is that the land has not yet been purchased by the real estate developer.

It is a story we have seen plenty of times. Investors in the hopes of making money or having savings for their future invest in these housing societies. They trust them because the societies run massive marketing campaigns with callous disregard for the truth. They also trust them because the project is backed by large groups and famous business families who hire celebrities as ambassadors for their projects. We have seen it happen before in Gujranwala and in Chakri and in so many other places.In the end, after the investor has surrendered their money, they are flippantly informed that the project is pending approval and given some half-baked excuse, leaving them to the dogs.  

This is where the court cases usually come in. On the one hand you have people that bought files complaining that they aren’t getting their promised plots. On the other, you have those few that actually provided the small bits of land that these developers acquire. They have been promised developed plots too. The developer, meanwhile, is out of funds and has done some sort of half-hearted development. The plots are stuck in a state of limbo and so are all the affectees. The rot goes deep enough that on some occasions even government departments have had a hard time recovering their land from real estate developers because someone has built a few houses over it. 

Glaring examples

It really has become a bit of a predictable mess. But the reason for going into such detail was because real estate development is also a threat to Pakistan’s agricultural land. This is vastly problematic because Pakistan already faces a severe crisis in agriculture where yields are falling and so is the patience and belief in farming as a profitable business and lifestyle. 

Data compiled by Profit using statistics from different departments such as the central bank and the PBS shows that Pakistan in 2021 (which is when the latest figures were available for) had just over 47.09% of its land under cultivation. Data from 1961 to 2021 shows that on average this number has been around 47.6%. What is glaring, however, is the eight year period between 1982 and 1990. In 1982 this area had actually risen to around 49.95%, but had fallen to 45% by 1990. This is of course due to a number of factors. 

Area under cultivation is a precious commodity. After all, the amount of land is not going to increase in any country. What we can increase are our yields, farming techniques, farm economics, and the quality of the agricultural inputs we use. 

Pakistan has a dire need to invest in its agriculture. Last year, the country became a net importer of food. For an agrarian economy, that is an abysmal state of affairs. Yet despite this we continue to put money into real estate development, going so far as to convert existing agricultural land into commercial real estate and play with the very existence of entire rivers.

“Right now we are instead focusing on real estate. What no one seems to realise is that while building a house generates immediate economic activity, once it is finished everything in that house is imported. Everything from the tiles and the fixtures in the bathroom to the car that will be parked in the garage and the chargers that will be plugged into the socket is imported. On top of that the land can also not be used again. If we had spent the same amount of money and energy on agriculture that would have a much bigger impact,” explains progressive farmer Ali Tareen. 

The one thing we cannot afford is for the amount of land we use to grow crops to also fall. That is exactly what the Supreme Court expressed concerns regarding in the recent case as well. The fear is not unfounded. There are many examples of agricultural land being used for residential real estate purposes instead.

Back in 2014, for example, the then provincial revenue minister and current chief minister of the province, Ali Ameen Gandapur, told the Khyber Pakhtunkhwa assembly that he total agriculture land in the provincial capital was 109,883 acres in 2001-02, which shrank to 106,576 acres in 2013-14. He said the data compiled by the office of the deputy commissioner showed a total of 3,037 acres reduction in agricultural land due to rapid urbanisation. Gandapur said like other districts, agricultural land in Nowshera, too, was under pressure due to construction of housing schemes and commercial activities. He said the farmland in Nowshera measured 289,094 acres and that the houses had been built on the 6865.5 acres of it since 2000. The minister admitted that it was a serious issue but the government was unable to stop construction on private agriculture land.

The reason he gave for the government’s inability to curb this? There was no law to restrict construction on agricultural land. Gandapur said the government could only prevent construction or other activities on the state owned agricultural land in the province. He said the planning and development department was chalking out a policy to stop utilisation of agricultural land for commercial or residential purposes.

In more recent times, farmers have also been vocal in their protests against such development. Back in October 2023, climate activists and agriculturalists banded together to voice their demand for an end to the development of housing societies and commercial structures on agricultural lands.

Under the Pakistan Kissan Rabita Committee (PKRC) banner, protestors gathered, denouncing profit-driven agricultural practices and urging governmental intervention to halt the conversion of farmland into commercial properties. They emphasised the critical need to safeguard food access amidst escalating climate change impacts. “We call upon the government to intervene and halt real estate developers from converting valuable agricultural lands into commercial ventures,” asserted PKRC General Secretary Farooq Tariq. He underscored the dire consequences of such conversions, highlighting their role in exacerbating climate instability, threatening food production, and undermining national food security.

The recent court case

The Supreme Court was right to be irked at the land acquisition process of different housing societies in the country. The particular case that the three-judge bench is hearing has to do with the Revenue Employees Cooperative Housing Ltd (RECHS) in Rawalpindi. 

RECHS acquired more than 2,830 kanals of land in 2005, subsequently transferring it to Bahria Town Ltd (BTL). BTL then conveyed the land to the Defence Housing Authority (DHA) in 2007 for the development of Askari 14 in Rawalpindi. This transfer occurred despite opposition from then-Punjab cooperatives minister Malik Mohammad Anwar, as indicated in a written statement. However, former chief minister Chaudhry Parvez Elahi overruled Anwar’s objection.

Expressing concern, the court questioned the conversion of agricultural land for residential or commercial use. CJP Isa requested concise statements from BTL and DHA elucidating this conversion, along with a site plan.

According to court proceedings, an agreement between Bahria Town and retired Colonel Abdullah Siddiq, the administrator of RECHS, was signed on Feb 17, 2005, resulting in the transfer of society land to Bahria Town. BTL subsequently transferred the land to DHA through another agreement in 2007. The CJP expressed dissatisfaction with the nature of this agreement. Punjab Advocate General Khalid Ishaq admitted that the RECHS administrator lacked authorization to enter into such an agreement after his tenure expired. He also noted that the former Punjab chief minister did not possess the authority to override the objections of his minister regarding the land transfer.

Moreover, the agreement between Bahria Town and RECHS was drafted on Bahria Town letterhead. Additionally, it was executed before the expiry of the five-year membership period for society members. Advocate Hassan Raza Pasha, representing Bahria Town, pledged to address the grievances of affected petitioners.

The eight all important questions

All of this has created a bunch of ruckus around what the appropriate way to transfer and acquire agricultural land for any purposes other than agriculture. For this purpose, the Supreme Court has set a list of eight questions that need to be answered in this particular case. 

The questions, simplified for language, are as follows: 

1. What are the benefits of turning farmland into residential or commercial areas for the province/country?
2. Do people who invest in building societies but don’t use the land help create jobs, economic activity, and taxable income?
3. Does converting land for other purposes reduce the availability of farmland, impacting food security and increasing reliance on food imports?
4. Who has the legal authority to approve changes in land use and projects?
5. Is there a provision for offering land to low-income individuals by providing smaller plots?
6. Should decisions about such important matters be made by elected representatives?
7. Do large-scale land conversions contribute to environmental harm, pollution, and climate change?
8. How do laws like the Transfer of Property Act, Registration Act, and Stamp Duty Act apply to these situations?

These are the questions that will determine the future of agricultural land and real estate development in Pakistan. For some years now, the government has been working towards discouraging the use of Green Areas for residential real estate development. However, as Ali Amin Gandapur expressed a decade ago as revenue minister of KP, there is no law in place that can help tackle it. 

The ideal solution to these problems is through legislation. But in the absence of this, depending on the answers the SC finds to these questions, a precedent could be set. This would mean that in the future if a project begins on agricultural land, the matter could be taken to court and the developer would have to answer the questions. It might not be an ideal situation, but it is very much a start.