National Engineering Services, Pakistan (Nespak) is said to have found or detected a Rs 500 million fraud in purchase of 20 kanals and 2 marlas by the National Insurance Company Limited (NICL), near Lahore airport. According to the agency, the present value of the land is Rs 562,500,000 which was purchased for Rs 1.06 billion.
The main accused of this mega scam, who include former Chairman NICL, Ayaz Khan Niazi, and NICL's Directors are behind bars whereas Mohsin Warraich, son of former Minister for Defence Production, Habib Ullah Warraich, is still at large. The Federal Investigation Agency (FIA) has accused Chaudhry Moonis Elahi, son of former Chief Minister, Punjab, Chaudhry Perhez Elahi of pocketing Rs 320 million from this deal.
FIA submitted an inquiry report on the NICL case in the Supreme Court on January 24, 2011, with the fifth assessment conducted by NICL through M/s Ahmed Associates on December 20, 2010, which valued the land at Rs 984 million against paid price of Rs 1.06 billion. FIA informed the SC that it has got the difference of Rs 80,400,000 from the seller and deposited the amount in the exchequer.
However, FIA report submitted in the SC also included the fourth assessment by FIA of November 2010 which declared the value of the land at Rs 150 million, with the loss of Rs 915 million. It was ordered that the price valuation be carried out by a reliable firm.
Nespak has therefore evaluated the price at Rs 562.5 million against Rs 1,06 billion ie loss of about Rs 500 million, and not Rs 80.4 million. According to Nespak, assessment of land (20 kanals and 02 marla) is based on general market survey of the area. The survey included contacting various real estate agencies in the vicinity and individual land owners. The team also made enquiries of transactions which took place during the recent past and the price of the properties presently available for sale.
The subject property falls under the category of a large size land holding. According to information provided by property vendors land sale of this size takes place between entities either directly without involvement of property dealers or is sold through auction/sealed bids mechanism. All such methods are employed by owners to obtain the optimum price for their asset.
Market price obtained from property dealers were generally for small sized commercial plots ranging from 1 to 5 Kanals. Available information suggests that per marla price of properties of less than 1 kanal on main airport road ranges between Rs 1,800,000 to Rs 2,200,000 per marla (Rs 36,000,000 to Rs 44,000,000 per kanal). However, for properties located away from airport road, the price range is between Rs 1,000,000 to Rs 1,500,000 per marla (Rs 20,000,000 to Rs 30,000,000 per kanal).
Information collected from property vendors of the most recent sale in the area was that of a parcel purchased by Allied Bank Limited (ABL) and a plot purchased by Hassan Estate. In both instances the per Marla price was pegged at Rs 2,000,000. However, in another transaction a 5-kanal plot was pegged at a price of Rs 800,000 per marla. Prices obtained for plots located in DHA Commercial Broadway were found ranging from Rs 12,500,000 to Rs 17,500,000 for 4 marlas and Rs 32,500,000 to Rs 37,500,000 for 8 marlas.
However, these rates are not applicable for commercial plots located outside DHA jurisdiction as they are for smaller plots present in DHA which is recognised for its infrastructure facilities and stringent construction and residency byelaws. Another aspect to be considered for the subject property is that it is located under the jurisdiction of Walton Cantonment Board and is close to the Lahore International Airport and as such may have limitations imposed by Civil Aviation Authority (CAA) regarding development of high rise structures.
Keeping in view the prevalent market rates and different factors discussed in the report, present trend of real estate market, location and size of property, estimated present day rate of land is determined in the following manner.
An area of around 4 kanals along main airport road is assessed at Rs 2,000,000 per marla (ie Rs 160,000,000). The remaining area (16 kanals - 2 marlas) at the rear is assessed at Rs 1,250,000 per marla (ie Rs 402,500,000). Therefore, present day value of land is determined as Rs 562,500,000 (Rs 1,400,000 per marla).
According to Nespak, the figure is a fairly reasonable assessed value of property in the present scenario. As property market is experiencing a slump over the years, it is difficult to monitor/ gauge property prices. However, the land worth is almost the same with an exception of 10% for the period July 2009.
This estimation of cost represents the best possible present day assessment as well as that of July 2009. However, prices are also influenced by other unquantifiable factors such as owner investment on account of efforts required for sale of property and its relative demand in the market, keeping in view its future usage. Exact financial impact of such intangible influences is not possible as it largely depends upon negotiations between seller and the purchaser. Some variations in price depending on timing of purchase/sale in July 2009 according to conditions prevalent at that time are possible. An allowance of up to ten percent (10%) is possible in the valuated price, the report concluded.