As the real estate prices reach historic
heights in Karachi, the Defence Housing Authority (DHA)
Karachi is currently finalising a deal to long-lease its
most precious 60,000 sq yard commercial plot worth about
360 crore rupees, right next to the McDonald’s restaurant
on the Clifton beach to a newly formed Karachi company,
according to senior officials at the Ministry of Defence
that oversees the various Defence housing authorities in
the country.
According to the relevant
officials and the documents available with this correspondent,
the DHA has surprisingly agreed that this new local company
shall make no payments to the Authority as it gets a 60-year
renewable lease and permission to construct a shopping
mall and entertainment complex on the best commercial
location in Karachi.
A Memorandum of Understanding
(MoU) signed between the DHA and Minhal (pvt) Limited
in December last year now being shaped into a final agreement
suggests that Minhal will pay a minimum amount of 30 million
rupees per year to the DHA for the first phase of this
three phase project, that will also include office and
residential towers and a hotel.
Surprisingly , the DHA has
also committed to authorise the Minhal (pvt) Ltd to mortgage
the land with banks to raise finances for the project.
Minhal estimate the project cost at US$170 million that
will include a thirty percent Minhal equity in the project.
Many Karachi retailers now
being approached by Minhal representatives to book space,
at exorbitant rental rates in the proposed project, are
wondering as to why the Minhal directors are the owners
and operators of the project for which the 360 crore land
is being provided by the DHA and the banks are covering
at least 70 percent of the construction cost.
"In case of a default
on part of the sponsors the DHA will be the greatest loser
with its 360 crore land mortgaged with the bank,"
said an independent financial analyst who provided a brief
independent financial assessment of the project. The tremendous
risk has no comparison whatsoever with the benefits for
the DHA in this project."
While the DHA placed a newspaper
advertisement generally seeking expression of interest
for its beach development project in Karachi late last
year, the advertisement made no specific mention about
this 60,000 sq yards plot and the DHA plan to offer this
plot free of cost to the developers for the development
of an international class shopping mall and entertainment
complex.
Even before this general
beach front advertisement appeared the DHA record showed
that the Minhal (pvt) Ltd had completed several presentations
on its proposal to the then head of the DHA executive
board Lt-Gen Tariq Wasim Ghazi and the then administrator
Brigadier Asif Ghazali.
"There is nothing unusual
about it, we always entertain individual proposals. Seeking
proposals and offers through newspapers advertisements
is not a standard practise with the DHA," said Brigadier
Maqsood Hussain, Administrator DHA Karachi.
Brig Maqsood though oversaw
the signing of the MoU between the DHA and the Minhal
Ltd last year, but the entire scrutiny and negotiations
on the Minhal proposal was carried out by his predecessor,
Brig Asif Ghazali.
Brigadier Maqsood Hussain
wouldn’t comment that an international advertisement
seeking offers for this most ideally located 60,000 sq
yards would have attracted huge sums and internationally
recognised builders and developers to the DHA Karachi,
but he insisted that the idea behind the agreement with
Minhal was to launch the beach development project through
a world class mall on the one end and the Creek residential
towers on the other of the 14 km beach front.
Leading real estate dealers
in Karachi estimate that an open auction of this plot,
even clipped with the DHA conditions and specifications
for a world class shopping Mall and entertainment complex,
will fetch up to 60,000 rupees per square yard for this
commercial plot, more so because the DHA runs a hassle
free system of clearances for the builders and developers
in its jurisdiction.
"We have an offer of
Rs 60,000 per sq yard for a less attractive commercial
plot in the nearby Clifton area," said an agent at
Karachi’s leading VIP real estate agency. "The
DHA can earn a minimum of 300 crore rupees from the sale
of this plot, still it can ensure that the land goes to
internationally famed builders who build a City Centre
Dubai like complex here," another top real estate
opined.
DHA officials maintain that
the proposal by Minhal that entails a minimum per month
payment to the DHA starting from 30 million rupees per
year in the first phase was professionally scrutinised
by their financial consultant, Jehangir Siddiqi &
Company.
"We only scrutinised
the proposal sent to us by the DHA," said a senior
executive at the Jehangir Siddiqi & Co. "Our
job is not to suggest DHA the best ways to market their
products. "It is up to the DHA to solicit offers
or sell their commodity through newspaper ads or to entertain
offers and proposals received directly," he said.
Jehangir Siddiqi & Company
executives wouldn’t comment that the sharp escalation
of the land price from 20,000 per sq yard last year to
the current price of 60,000 rupees demands a complete
financial review of the project.
"We are going to build
a world class project," said Farid Virani of Agha’s
store in Karachi who founded the Minhal (pvt) Ltd with
a serving city bank executive and an oil trader. Farid
Virani said that there was nothing exceptional about the
DHA decision not to invite offers for this splendid commercial
plot through specific advertisement. "There are many
projects in the DHA for which the authority didn’t
issue any advertisements."
He said: "We have hired
NORR, an internationally reputed company as the consultants
for the project, and there is no way we would fail in
our ambition to raise a great complex for Karachi."
Several Ministry of Defence
officials said that the plot on which this deal is being
struck between the DHA and Minhal Ltd was actually earmarked
for a big public park and jogging track by the former
Corps Commander Karachi, Lt-Gen Muzaffar Usmani in his
position as the head of the DHA executive.
These officials said that
Gen Usmani’s successor Lt-Gen Tariq Waseem Ghazi
allowed the change of status for the plot and desired
that the land be used for the development of a shopping,
residential, entertainment and hotel complex.
