China, buoyed by its rise as an economic power, is planning to revive the old Silk Route under the new concept of ‘One Belt, One Road’, an initiative that will eventually connect 26 countries. China’s Foreign Ministry shared the objectives of this initiative in March 2015, stating that: “One Belt, One Road is aimed at (i) promoting orderly and free flow of economic factors, highly efficient allocation of resources and deep integration of markets; (ii) encouraging the countries along the Belt and Road to achieve economic policy coordination and carry out broader and more in-depth regional cooperation of higher standards; and, (iii) jointly creating an open, inclusive and balanced regional economic cooperation architecture that benefits all.”
The China-Pakistan Economic Corridor (CPEC) is the most important component of this three-pronged initiative. CPEC runs from Kashgar in China to Gwadar via Karachi, and extends to Turkey through Iran. CPEC is a mix of projects that includes road networks, railway lines (connecting Kashgar with Gwadar), an optic fibre cable project, a dry port and energy-producing units.
The value of CPEC has been jacked up from $46 billion to 59 billion, because of the inclusion of new projects by the Joint Coordination Committee (JCC), in a meeting held in Beijing in December last year. These new projects include the development of Diamer-Bhasha Dam, Peshawar-Karachi Railway Line, Karachi Circular Railways, Orange Line trains for all provincial capitals, the Keti Bander Port, Special Economic Zones (SEZs) and three energy projects in Sindh.
As a result, CPEC is perceived as a harbinger of transformational change in the economic profile of Pakistan and other regional countries. Conceptually, the characterisation of CPEC as a game changer, a catalyst of economic revolution in Pakistan and an engine to propel regional economic prosperity is beyond reproach. The connectivity that CPEC will provide to the Central Asian states, and the likely inclusion of Iran, Turkey, Russia and some European countries will make Pakistan a hub of economic activity, with Gwadar facilitating trade with neighbouring countries, including China.
For a resource-constrained Pakistan, an investment of $59 billion in the projects under the umbrella of CPEC, presents the ideal platform to nullify the effects of past missed opportunities and embark on a path of sustained economic growth. For China, connectivity with Gwadar will provide easy access to the Arabian Sea and the expansion of its commercial interests globally. It promises a win-win situation for the region, specifically for Pakistan; a naturally endowed country with a unique geo-strategic location.
It is estimated that the cash inflow under CPEC will more than equal the Foreign Direct Investment (FDI) that has come into Pakistan since 1970, an amount that is forecast to equal nearly 17% of the GDP. Furthermore, CPEC projects are likely to create more than one million jobs in various sectors of Pakistan by 2030.
In addition to the direct economic impact of CPEC, economists believe that there will be a ‘multiplier effect’ and the volume of investments will increase manifold, as a result of the emergence of downstream projects and their spill-over effect into other sectors of the economy, specifically in real estate.
CPEC projects are likely to create more than one million jobs in various sectors of Pakistan by 2030.
Sources in the Planning Division of Pakistan, which is handling the CPEC initiative, believe that it will trigger a boom in real estate and that the property market is likely to experience a four-fold increase in the existing volume of commercial and residential projects in forthcoming years.
Although, due to the unregulated nature of the sector, official figures are hard to come by, real estate experts estimate the existing monetary value of real estate assets to be anywhere between $300 and 700 billion. In the last five years alone, there has been a growth of almost 118%, thanks to projects of key players such as Bahria Town, DHA, Paragon Constructors and Rafi Group, to name a few.
Industry stakeholders are unanimous in their opinion that the immediate outcome of CPEC has been a rapid rise in property values along the arteries of movement in suburban and rural areas. This has been particularly true for Havelian (the second largest municipality in Abbottabad District) where a dry port is being built and substantial FDI has been reported in the acquisition of residential and commercial plots in the adjoining areas. Properties that were considered worthless a decade ago have suddenly become the most sought-after pieces of land in Pakistan.
Real estate experts estimate the existing monetary value of real estate assets to be anywhere between $300 and 700 billion.
In Gwadar, a number of housing schemes and commercial buildings are under construction. As a result, land prices have almost tripled and the port city is expected to soon become one of the most in-demand real estate investment destinations in Asia. The Government of Balochistan, as well as private builders, have also launched housing schemes with modern facilities and amenities, as well as recreational projects to cater to the demand for well-equipped residential community projects by Chinese expatriates.
The Gwadar-Kashgar route will pass through Turbat, Panjgur, Besima, Surab, Kalat, Mastung, Quetta, Qilla Saifullah, Zhob, D.I. Khan, Mianwali, Balkasar, Hasan Abdal, Abbottabad and Gilgit. The acquisition of land for constructing road networks in these areas is underway and mainly supervised by the Government of Pakistan. The development of this extensive road network will ensure that previously isolated areas in Gwadar will be easily accessible, further contributing to an increase in prices. Several railway line projects are also planned along the route.
As a result of all this, there has been a corresponding increase in investment and development of retail projects. Furthermore, builders and developers in Faisalabad, Lahore and Multan have reported increased investor interest in properties there, due to which they expect prices to experience a further boost as more CPEC projects are announced and approved.
Another crucial avenue for CPEC-driven real estate business and investment is the planned development of SEZs. Eight such Zones are to be built, with one each in the four provinces, as well as in AJK, FATA, Gilgit-Baltistan and Islamabad capital territory. The exact location of these zones has not been finalised and consultations with provincial governments are underway. These Zones will serve as primary hubs of industrial activity in the country. The vision for CPEC is to establish a complete ecosystem that includes generating employment through manufacturing, a convenient commute via a well-connected transportation network, residential schemes for people who relocate there and commercial enterprises to cater to the daily requirements of residents. However, the lack of verified data makes it difficult to estimate the impact in the value of the real estate assets in these areas.
CPEC is poised to give tremendous boost to the real estate industry in Pakistan, which even otherwise, has a promising outlook, given that a 2.8% annual population growth rate (source: Federal Bureau of Statistics, 2016) entails that more housing projects will need to be established.
The writer is an academic and a freelance journalist. ashpak10@gmail.com