AYESHA SHAIKH: How did the idea of developing a project such as Eighteen come about?
TAREK HAMDY: Our major shareholders, Ora Developers, have been in the luxury real estate business since decades and have successfully completed projects in Cyprus, London, Grenada and Egypt and they wanted to do the same in Pakistan. Our other partners in Eighteen are Saif Group and Kohistan Builders and Developers. The partners had, about a decade ago, bought land near Islamabad airport. It was after this that the conceptual design of the project started and we were required to submit the master plan as well as environment and infrastructure reports for approval from the relevant building authorities. The project plans received formal approval in November last year and this is when we officially started the project.
AS: What are the dynamics of the real estate market in Pakistan?
TH: Pakistan has a backlog of over 12 million housing units, a situation we witnessed in Egypt 15 to 20 years. An interesting aspect of this market is that even with smaller plot sizes, such as half kanal or five marla, the demand is for three to four bedrooms with en-suite bathrooms – which compared to the rest of the world, is considered a luxurious proposition. Clearly, Pakistan is an emerging market in real estate with people turning into savvy buyers and demanding good design.
AS: Luxury real estate in Pakistan has become a very competitive sector. What makes Eighteen stand out in this respect?
TH: Unlike other projects, buying a home in Eighteen means that you own the land on which it is built. Buyers receive a complete transfer of ownership with the title deed. For 90% of the projects in Pakistan, the developers (who do not own the land) provide owners with allotment letters which only authorise possession. When you buy property in Eighteen, you own the land as well as a house fitted with wardrobes, kitchen cabinets and house appliances. The project follows strict design guidelines and a uniform architectural vernacular to ensure that every aspect has the same look and feel. Our design partners include WATG, Wimberly Interiors, International Design Group and nine local consultants. Another point is that Eighteen is not a conventional real estate development project where maximising profits is a primary goal; had that been the case, Heights, our apartment complex, would have been a high-rise. Instead, we have limited construction to ground plus four or five-storeys, in both residential and commercial buildings, so that people can enjoy the skyline and vistas of Islamabad. Furthermore, instead of building on 25% of the available land as is the norm, construction has been restricted to 15%, which means there will be ample space for an 18-hole golf course, parkways and open spaces. What makes Eighteen unique is that it is a city within a city, with an onsite club and other sporting facilities, a high-tech and green business centre, a medical facility, a five-star hotel and a high-end shopping and dining complex. We are developing a luxurious real estate destination, not just selling property.
AS: Are expatriate Pakistanis your primary audience?
TH: It would be myopic to focus only on one segment. The homes we are designing cater to the middle-class, the upper middle-class and high net worth individuals. There will be commercial tenants as well as retail opportunities within the gated community. Expats in North America, the UAE and UK are an important segment, but 90% of the units we have sold so far have been bought by Pakistanis from the large metros as well as second-tier cities. The perception may be that we are catering to the elite, but 70% of our products are built on plots measuring half kanal and five marla. These are comparatively small in terms of covered area and are priced accordingly, targeting young professionals and couples.
AS: Does that mean that affordability is not an issue?
TH: If you look at the prices and factor in the cost of accessible, quality amenities, as well as the fact that people will own the land on which their homes are built, the price is extremely competitive. From our point of view, given that many services are sourced from international partners, we are losing out on the foreign exchange as we pay them in dollars while customers pay in rupees for the property. Since delivery will be in three years’ time, the more the rupee depreciates, the more our expenses will increase, yet we are not passing on the additional cost to buyers. Simply making money is not our objective; the government has allowed us to build up to 13 storeys; limiting buildings to only four or five floors was an internal decision.
AS: What obstacles has the company faced in developing the project?
TH: A major problem is making tax-free payments to our international partners as this has not been approved by the State Bank of Pakistan (SBP) yet. If SBP were to allow even one percent of the development cost of a project to be paid as tax-free fee to international design companies, this would significantly improve the quality of real estate projects developed locally. This is not because local firms are not capable; they simply lack experience in certain kinds of architecture and design. Furthermore, some of the construction materials and products (marble and tiles) sourced from other countries carry heavy customs duties. This does not make sense because these materials are imported for a specific purpose and are not competing with locally manufactured goods, so the tax tariffs in such cases should be revised. If the government wants to incentivise international builders to develop projects in Pakistan, the sliding rupee exchange rate has to be stopped. It is impossible to factor in the cost of exchange rate fluctuations in real estate projects with a delivery time of three to four years.
AS: Regulating and taxing real estate is a recent development in Pakistan and there were fears that the market would collapse. Are regulatory changes a cause for concern?
TH: We welcome all regulatory changes because in terms of design, architecture and construction, we have complied with the bylaws of all the government bodies that have jurisdiction over the project. Increased market regulation works in our favour and when we provide home owners with a title deed in their name, they will appreciate the value of the sales agreement they receive from us. Our investors plan on reinvesting profits from Eighteen into other real estate projects throughout Pakistan. In fact, we are looking into developing low-cost housing projects in collaboration with banks so that people can take advantage of bank-financed long-term repayment plans.