LDA takes action against land grabbers


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LAHORE: In a drive against land grabbers, the Lahore Development Authority (LDA) on Monday took action against land grabbers and regained possession of various plots.

According to the details, the plots were retrieved from land grabbers in Johar Town valued at Rs10mn each.

The action was taken by the Enforcement Wing and Directorate of Housing of LDA and retrieved five plots in the vicinity.

The civic authority has launched action against land grabbers on various occasions and retrieving the state-owned land and private plots from land grabbers.

 

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Land Valuation in Pakistan


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Introduction

Pakistan’s real estate sector holds immense value for the country’s economy and growth. The improved security situation, rise in inbound tourism, regulatory relaxations for the construction sector, and higher ranking on the ease of doing business index means that investments and remittances are flowing into the country. Foreign remittance reached USD 24.2 billion in the first ten months of the fiscal year, a growth rate of 29 per cent compared to the previous year (The News, 2021). According to UNCTAD’s 2020 World Investment Report, FDI inflows to Pakistan increased from USD 1.7 billion in 2018 to USD 2.2 billion in 2019 (Santander, 2020). However, realising the true potential of real estate largely depends on land valuation and transparency in the sector. Since land valuations are used in the financing, sales listings, investment analysis, property insurance, and taxation, transparent practices can help bring improvement in all the mentioned areas. Continue reading to understand land valuation practices in Pakistan.

 

Research Questions

  • What is land valuation?
  • How is land valuation practised in Pakistan?

 

Land as An Asset

Buy land as they are not making it anymore, Mark Twain once advised. The land is a tangible and easily definable asset compared to company bonds or government bonds. Land can also be developed over time to increase its utility and value. Major cities of Pakistan experienced an increase of 85 per cent in their residential market value between 2013 and 2018 (Wani, 2020). However, investors and businesses remain hesitant to invest in Pakistan’s real estate sector due to the absence of incentives for investors, strict regulations on banking transactions, and levying high taxes while transferring property. Pakistan’s land market is also susceptible to speculation and the formation of real estate bubbles by artificially inflating land prices in boom phases. Therefore, an accurate and transparent land valuation can alleviate most of the problems faced by investors in the real estate sector of Pakistan.

 

Land Valuation in Pakistan

Pakistan’s real estate market lacks regulation as currently, there is no government body to oversee activities of developers, regulate real estate agents and brokers, or set standards for best practices. Therefore, the land valuation system is based on the decades-old system that is manipulative and undervalued property. The government is trying to bring in additional tax revenue from the real estate sector by introducing slabs on capital gains tax. Still, no proper step can be taken in this regard unless accurate land valuations reflective of on-ground realities are not carried out. Currently, three different rates for a property exist in Pakistan. The first is decided by the Federal Board of Revenue (FBR), the second is determined by the District Commissioner (DC), and the third is the market rate. In almost all cases, the market rate is much higher than the FBR or DC rate. Therefore, the government remains unable to generate sufficient tax revenue according to transactions done on market rates. As speculators also inflate the market rates to give an advantage to particular groups, illegal or black money also penetrates the market.

Typically, the land is valued according to several different factors in Pakistan. Location is the most critical factor that decides how much land is worth. The value derived from the location is based on the physical and socioeconomic characteristics of the property. Another important factor is soil composition. As new housing societies and commercial areas are developed, the land is usually levelled by compaction after filling it with soil. This divided land into two categories, namely, solid ground and filled the land. Solid land is also more valuable as it is natural and fortified by the earth, whereas filled land must be strengthened by adding foundations during construction, increasing the overall costs (Goss, 2019). These two attributes can be considered among the physical characteristics of the land. In terms of the socioeconomic qualities, the price of surrounding areas is another primary consideration. These are referred to as comparables and must be similar in their characteristics to the land being evaluated. Accessibility and land use also play a vital role in deciding the value of a land (Qureshi, 2016). Therefore, like all other global real estate markets, the land is valued in the same way in Pakistan. The only difference is that state valuations are way below the market value. That hurts tax and revenue collection from the real estate sector, making the call for an established land valuation system necessary.

Conclusion

Realising the true potential of real estate largely depends on the accurate and transparent valuation of land. Being a tangible, definable, and scarce asset, it is relatively easy to calculate the land value, provided that data on all the required indicators is found accurately. As a result, all major cities of Pakistan have experienced an 85 per cent increase in their property value over just five years. But as investors and foreign businesses remain hesitant to invest in the real estate sector of Pakistan due to several malpractices and regulatory challenges, accurate and transparent land valuation can pave the way for reform in the real estate sector.

 

Key Takeaways

Foreign remittance reached USD 24.2 billion in the first ten months of the fiscal year, a growth rate of 29 per cent compared to the previous year.

According to UNCTAD’s 2020 World Investment Report, FDI inflows to Pakistan increased from USD 1.7 billion in 2018 to USD 2.2 billion in 2019.

Realising the true potential of real estate largely depends on land valuation and transparency in the sector.

The land is a tangible and easily definable asset compared to company bonds or government bonds. It can also be developed over time to increase its utility and value.

Major cities of Pakistan experienced an increase of 85 per cent in their residential market value between 2013 and 2018.

Investors and businesses remain hesitant to invest in Pakistan’s real estate sector due to the absence of incentives for investors, strict regulations on banking transactions, and levying high taxes while transferring property.

 




Rawalpindi Development Authority’s (RDA) Land Use and Building Control Department (LC&BC) during the fiscal year 2020-21 has generated a revenue of Rs331mn.


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ISLAMABAD: Rawalpindi Development Authority’s (RDA) Land Use and Building Control Department (LC&BC) during the fiscal year 2020-21 has generated a revenue of Rs331mn.

According to the details, the generated revenue is much more than the set target of Rs195mn.

While felicitating the whole administration, the chairman RDA informed that the civic authority had missed the target of FY2019-20 in which Rs165mn was collected against the target of Rs190mn.

Furthermore, the Additional Director LU&BC, informed that RDA had received a total of 1400 building plans for construction which the most ever recorded.

 

For news and blogs, visit Graana.com 




Supply Side Challenges of Affordable-Housing: Land Acquisition

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Ensuring that land is utilised optimally is important to the economic, social, and environmental benefit of the population. Looking at the supply and demand side of affordable housing, it is important to identify the challenges and solutions to bridge the gap in access to affordable housing.

 

Introduction

Land acquisition is perhaps the most important and complicated piece of the affordable housing puzzle. The process starts with confirming the ownership of land, carrying out a survey that defines the dimensions of the land to be acquired, determination of fair market value, and procurement through a transparent and fair process. In a country like Pakistan, where land records are poorly managed and lack transparency, it becomes increasingly difficult to ascertain the true ownership of any land. The demarcation of land is also a difficult process as the whole exercise depends on a single officer due to a lack of digital mapping. Determination of fair market value is mostly challenging due to a large amount of speculation in the real estate market. While a lack of regulation in price-setting means that most of the land is either overpriced or not worth its demanded value. All these aspects are considered the most basic supply-side challenges associated with providing affordable housing in urban centres.

 

Land Acquisition Instruments

Land acquisition can be stated as an action by the government whereby it acquires land from its owners to pursue a certain public purpose. Land acquisition can be against the will of the owners, but due compensation is paid. This distinguishes it from the outright purchase of land from the market. The three most common instruments used in land acquisition are land pooling, negotiated settlement, and formal acquisition. In the land pooling process, when private sector development is hindered by scattered and unsuitable allocation of land, an additional provision of infrastructure and services is needed. Landowners voluntarily sign ownership rights to a single agency or government body, which in turn develops the land by building basic infrastructures such as roads, sewage lines, electricity, and water connections. The agency then returns a small portion of land to the original owner, equivalent to the market value of the owner’s land before development. This process is the least cumbersome as it is voluntary and ensures the planned development of the land. But if the intent to pool land is leaked in the market, there is a high probability of the creation of cartels. Also, developing an infrastructure does not guarantee the development of land. Speculators may choose not to develop affordable housing at any stage of the process. (Archer, 1992)

 

A negotiated settlement is where a seller wants to sell a piece of land and is looking for financial compensation rather than retaining a stake in the land. The government will provide an opportunity to negotiate through market transactions rather than expropriation. In this way, the trading parties have to agree on a framework of assessment, negotiation, settlement, and implementation. The agency buying the land works towards an agreement after carefully assessing the land, loss valuation, and impacts of events such as flooding. Those affected by this agreement can demand higher compensation from the government instead of the price negotiated in the original deal. Then there is the instrument of formal acquisition. When voluntary methods and negotiated methods are no longer an option for landowners, access to land is deemed imperative for the local authorities. This entails compelling owners to sell their land or involuntary action, thereby displacing residents through enforcement. The agency compensates owners for their land, but if the compensation is too low, they are forcibly evicted. This method is usually costly and unpopular but provides compensation quickly at fixed market rates. (World Economic Forum, 2019)

 

Securing Titles in Land Acquisition

Secure legal titles and property rights encourage investment in land and also improve access to infrastructure. However, attempts to convert informal settlements into land titles can risk widening the inequality by favouring groups with better access to information. Therefore, another approach could be to emphasize rights rather than titles to preventive measures such as forced evictions and relocations. Following this method, the government can ensure the poor living in informal settlements to loan out their lands for making two to three-story homes whereby one story would be given to the right owner and the other will be sold at market value to cover some part of the cost. Public land ownership also holds the key to affordability in cities where middle- and lower-income families are unable to compete with corporate investors, but community[1]housing providers and city governments could collectively purchase or repurchase large quantities of housing stock. (Brandt, 2009)

 

Conclusion

Providing affordable housing to the masses is an uphill task that involves many processes and stages. The first stage of supplying affordable housing is acquiring land for development. Land acquisition is different from purchasing land at a market price. The three most common instruments used in land acquisition are land pooling, negotiated settlement, and formal acquisition. All three methods have certain merits and demerits and can be used according to the situation at hand. Land titles are also an important aspect connected to land acquisition processes as those who hold these titles are entitled to compensation under the process. Therefore, it is pertinent to understand the process of land acquisition and its methods to understand the challenges associated with the supply of affordable housing.