The tower that taxpayers may end up buying twice

ISLAMABAD: In May, the Islamabad High Court told buyers of apartments in One Constitution Avenue, a tower in the capital’s Red Zone, that their fate would “sink or sail” with the developer, BNP (Pvt.) Ltd.

In other words: chase BNP for your money.

Six months later, the government has offered a different answer. The Capital Development Authority (CDA) — and, ultimately, the taxpayer — is to pay.

On November 4, the federal cabinet approved the report of a joint inquiry team (JIT) led by the National Accountability Bureau (NAB).

Planning Minister Ahsan Iqbal laid out its findings at a press conference. The bidding process had been manipulated and the CDA was complicit, he said. Abdul Hafeez Sheikh, BNP’s chief executive, was the alleged mastermind, and he and his company would be blacklisted.

Those who were “defrauded”, Iqbal said, would have their principal investments refunded, with payments adjusted against KIBOR, the Karachi Interbank Offered Rate.

Interior Minister Mohsin Naqvi said the building would be converted into a five-star hotel “within months”.

The tower was never supposed to contain private homes.

In 2005, the CDA auctioned 13.5 acres of land for a hotel project for Rs4.88 billion. The JIT report reads like a catalogue of how an auction can be bent.

A first auction was cancelled and the rules were loosened, both without the CDA board’s approval, according to the report. Serious bidders walked away.

BNP Group eventually won, although the JIT says that, when rescored strictly, its bid should have received 19 marks out of 100 rather than the 83 it was awarded.

The lease was then signed not with the winning consortium but with another company, which Abdul Hafeez Sheikh renamed BNP (Pvt.) Ltd on the same day he applied to the securities regulator.

A bank guarantee covering the remaining Rs4.15 billion was waived on the basis of an opinion written on a CDA legal adviser’s private letterhead.

A sub-lease clause was inserted into the deed.

Plans allowed for 120 serviced apartments. Instead, 254 apartments were built and sold. Buyers paid Rs9.46 billion for them.

The JIT holds Abdul Hafeez Sheikh and five former CDA officials responsible, including former CDA chairman Kamran Lashari.

None has yet been charged. NAB is to file a reference within three months.

The courts and the unpaid bill

The courts took a different course.

In 2019, a Supreme Court bench led by former chief justice Saqib Nisar restored the cancelled lease on the condition that BNP pay Rs17.5 billion over eight years.

“Why should the people who spent four billion to buy those apartments have to suffer now,” Saqib Nisar asked during the proceedings.

The CDA objected that another member of the bench, Ijaz ul Ahsan, had previously represented BNP as a lawyer. Saqib Nisar overruled the objection.

Ijaz ul Ahsan also sat on the 2023 bench that disposed of BNP’s review petition.

BNP paid perhaps Rs2.9 billion before defaulting.

Mohsin Naqvi has described the affair as possibly “the biggest scam in Pakistan’s history”, involving “judges, bureaucrats, politicians, bankers”.

The JIT itself, however, names no judge.

Now comes the refund

For apartment buyers, the government’s proposed solution could mean substantial payouts.

Nawaz Bhatti, an American citizen, says he paid about Rs4.5 crore (Rs45 million) for one apartment in 2014 and Rs5 crore (Rs50 million) for another in 2015.

Using the State Bank of Pakistan’s six-month KIBOR, HUM News estimates his refunds at about Rs10.7 crore (Rs107 million) and Rs11.4 crore (Rs114 million), respectively, if simple interest is applied.

If the interest is compounded, the amounts could rise to about Rs16.4 crore (Rs164 million) and Rs16.6 crore (Rs166 million).

Bhatti blames “CDA negligence”.

Owners, he says, can neither legally sell nor transfer their apartments while the building deteriorates. He wants out — with interest at market rates.

Across the 205 owners whom the JIT considers genuine purchasers, HUM News estimates that total refunds could range from Rs16 billion to Rs21 billion — roughly the amount BNP was ordered to pay but never did.

The apartments themselves are worth considerably more today.

Zafar Iqbal, who has worked as an estate agent in Islamabad since 2009, estimates that a 4,500-square-foot apartment could fetch about Rs16 crore (Rs160 million), while a 712-square-foot unit could be worth about Rs4.05 crore (Rs40.5 million).

Rents are steep too: about Rs1.5 lakh to Rs1.8 lakh (Rs0.15 million to Rs0.18 million) a month for a smaller apartment and up to about Rs8.4 lakh (Rs0.84 million) for a larger one.

But without a completion certificate, no sale can legally be completed.

A hotel, a re-auction and unanswered questions

The JIT recommended a transparent re-auction of the property. Mohsin Naqvi, however, has spoken of a direct arrangement with a hotel chain.

Forty-nine purchasers whose transactions the JIT could not verify have no stated remedy.

A May injunction issued by the Islamabad High Court also continues to bar the CDA from evicting 84 occupants until their appeals are decided.

The government says nobody will lose out.

But Pakistan’s taxpayers — who bought no apartments and received no land — may yet end up paying for the tower twice: first through the terms on which public land was handed over in 2005, and again through refunds to the buyers of apartments that were never supposed to be there.