In Pakistan, the relationship between political power and land ownership is one of the most entrenched and problematic connections in the country. Historically, the transfer of influence from the traditional landed aristocracy to the rising urban property owners has not only shifted power dynamics but also contributed to the creation of an economy characterized by high consumption and low productivity.
Princeton economist Atif Mian, in his recent analysis, highlights how this nexus between power and land has severely damaged Pakistan’s economy. He emphasizes that land, particularly urban property, has become the preferred asset for those in power to extract wealth from the economy. This relationship came under scrutiny recently with the arrest of retired Lt Gen Faiz Hameed, the former head of Pakistan’s intelligence service, who is accused of using his position to coerce a developer into surrendering valuable land. The developer, in turn, is alleged to have acquired the land fraudulently.
The practice of using real estate to launder money and evade taxes is a well-known but largely unchecked issue in Pakistan. A look at the balance sheets of many listed companies reveals that they have significant investments in property, often at the expense of more productive assets. This trend is fueled by the tax exemptions enjoyed by the real estate sector, making land one of the most profitable and least taxed asset classes in the country. This situation contributes little to national revenue, whether measured as a percentage of GDP or as a share of total tax revenue.
The critical question remains: Can this deeply entrenched nexus between power and plots be dismantled? Given the influence of those who benefit from this system, any attempt to break this connection faces significant resistance. Recent federal and provincial budgets illustrate that the beneficiaries of this nexus are powerful enough to block any meaningful effort to tax real estate effectively, despite the country’s dire fiscal situation. Moreover, certain groups, including civil bureaucrats and military personnel, are even exempt from property taxes, further entrenching this system.
This scenario reflects a broader issue within Pakistan’s economic framework, which seems to be designed to favor rent-seeking elites rather than fostering broad-based economic growth. Unless this framework is fundamentally reformed, the country’s economic woes are unlikely to change. The power-plot nexus remains a significant barrier to Pakistan’s progress, and dismantling it is crucial for creating a more equitable and productive economy.
