**360 crore DHA beach front plot goes virtually for ‘free’
Newly formed company to get huge financial benefit**
By Kamran Khan
KARACHI: **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. :rolleyes:
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.