The highrise-demolition fallout

[Lahore_Real_Estate]

Urban/urbane

Monday, January 04, 2010
Ahmad Rafay Alam

The Lahore Development Authority is in the process of demolishing illegally built highrises. It is doing this on the orders of the Supreme Court. More than anything else, this is the symbol of the burst property bubble of the mid-decade. Now, with competing statements coming from the governor of Punjab on the one hand and senior ministers of the government of Punjab, a massive oversight appears to be growing day by day: the protection of the tens of thousands of investors with whose money these highrises were built. This is a subject that has not been properly discussed, and deserves to be.

A few years ago, the neighbours of a property developer constructing “the tallest highrise” along Gulberg’s Main Boulevard, woke to find, much to their surprise, an extra step in their living rooms. The piling of the construction – the support foundations need in order to prevent them caving in – was apparently not of the right order and, as a result, serious property damage was caused to said neighbours. A suit for damages was filed and a stay of construction sought.

By the time the stay matter had got to the Supreme Court – and these were the days before Pervez Musharraf decided to vent his fury against members of that Bench – it became clear that the property developer had followed the letter of the law: he had applied for building permission and the LDA had approved his plans for construction, piling and all.

Which is when the Supreme Court is said to have asked the LDA to call its structural engineer. After all, the science of highrise constructions is the subject matter of specialists. However, to everyone’s surprise, the LDA replied that, at the time it didn’t have a single structural engineer in its employ.

The magnitude of the safety risk posed by poorly constructed highrises was enough for the Supreme Court to take the extraordinary step of ordering a blanket stay on all highrise construction in the city. And while I will make this point later, this is exactly when the clock started ticking for local and provincial government authorities to step in and start thinking about how to protect the many investors – with whose money these buildings were being built – in the event buildings were found to be unsafe.

In any event, the Supreme Court ordered the formation of a three-member committee to examine every single highrise in the city to determine, amongst other things, whether they had been constructed with properly approved building plans, whether such building plans were structurally safe and whether or not property developers had finished their constructions in accordance with approved plans. (In other words, to check if there were shops where parking should be or if there were seven floors when only three had been approved.)

The sack of the superior judiciary and one restoration later, the highrise committee undertook the arduous task of surveying literally thousands of highrise structures and preparing a report on each one. When its task was complete, the committee submitted its report and recommendations to the Supreme Court and the court then ordered the Lahore Development Authority to proceed in accordance with the recommendations of the committee. Hence the present demolitions.

Of course, it takes both hands to clap. For each illegally constructed building, for each violation of approved plans or of building regulations stood a supposedly deaf, dumb and blind LDA and City District Government of Lahore. Recent news has it that legal proceedings have been initiated against some 20 LDA officials and some 50 officials of the local government. The rule of law, for sure, is being applied to everyone who had a hand in this sordid mess. Developers who flouted the law and urban fathers who permitted it cannot and must not be allowed to get away.

And that, in a nutshell, is the first layer of what this entire demolition saga has to offer. But peel below and a completely different picture appears. One that was out of the contemplation of the Supreme Court when it constituted the committee, one that was outside the committee’s terms of reference and one which the provincial government, the LDA and local government authorities cannot, at this stage, say they had no knowledge of. It is the picture of the investor with whose money these buildings were constructed.

It’s common knowledge that building developers do not spend their own money on the construction of a building. They may cover, for example, the cost of land, and quite often this burden is shared by a consortium of property owners (most of the highrises being demolished now are built after permission was given to commercialise residential land), developers and financiers. The cost of construction is paid for by subscriptions to the development made by investors. The building boom in Lahore during the middle of the decade, in many ways though at a comparatively smaller scale, mimics the South Sea or any other investor bubble since. When the bubble breaks, it’s the investor left to cover the loss.

When an illegal structure, like the ones identified by the commission, is torn down, all that’s left is the rubble of the structure and the land itself. The rubble, whatever its worth, is either auctioned off or appropriated by the thekedar (contractor) responsible for the felling (I’m not clear on the LDA’s deals with demolition contractors). Meanwhile, the land, even if it is sold, cannot cover the repayments to all the investors in the highrise. At best, they’ll get a few paisas on their rupee.

It’s true that the profits made by the developer during the course of the construction should, in a perfect world, be divided and returned to investors. But doing that would involve a massive paper trail that, quite simply put, no one in the present provincial government, the LDA or local government setup has the competence to deal with. Criminal action against developers is also an option, but so far none has been taken against developers who, knowingly and wilfully, took the public’s money for buildings they knew were being constructed in violation of law.

For years now, I have joined the chorus of voices demanding better building regulations that recognise rights in highrise properties. The law, as it stands today, is still firmly rooted in a two-dimensional view of immovable property. It is ill-equipped to deal with issues surrounding compensation of immovable property in three-dimensions. (The ownership of a fifteenth-floor apartment is an abstraction; it is three-dimensional block of air for which our laws are simply not designed.)

I have attended meetings over the past year where the very good idea of introducing condominium-style laws has been discussed. In one meeting, between the commissioner of Lahore Division and the director general of the LDA and MPAs were told that such a law was on the anvil. Where, I ask, is it now? The building demolitions did not show up out of the blue. They were well expected.

It may well suit the government of the day to ensure that the orders of the Supreme Court are carried out. But in not providing for the fallout, the government has failed to carry out its first responsibility as representative of the people: to ensure the safety of their life and property. Meanwhile, it does not behoove property developers (the current governor of Punjab included) to attempt to ride the wave of public sympathy created over the plight of the poor investor. Both parties have been caught sleeping on the job.

The writer is an advocate of the high court and a member of the adjunct faculty at LUMS. He has an interest in urban planning. Email: ralam@nexlinx.net.pk