ARY Laguna Scam? History rhyming

ARY has no capability to execute real estate projects

Prospective homebuyers and investors that choose to ignore red flags of a project do so at their own peril. In the case of Bahria Town Karachi (BTK), each event leading up to its launch was flashing a warning that it will be a scam.

In the case of ARY Laguna, the warning signs aren't that obvious. Only in hindsight will we be able to say if ARY Laguna is a scam or the issues I will be highlighting were just small hurdles in ARY Laguna road to becoming a landmark project in Pakistan.

As the project hasn't been formally launched yet and the situation continues to develop, it is not possible to do a comprehensive overview in a single post. I will try to cover it over multiple posts. This first post covers the red flag that is ARY's track record.

Not ARY's first rodeo

This is not ARY's first real estate project. ARY announced its foray into the real estate business in Dubai in 2003 to benefit from the construction boom at the time.

Haji Abdul Razzak Yaqoob, chairman of the ARY Group of Companies, said that the ARY Marina View is an exclusive nine-storeyed residential tower, which offers luxurious one, two and three bedroom apartments and five bedroom waterfront villas situated on the Dubai Marina. He said the total project cost would be between Dh80 and Dh100 million.

The chairman also said that this is only the beginning of the group's entry into real estate venture as a number of projects are now being lined up with ARY Marina View Phase II, a 16 storey residential building, planned at the Dubai Marina shortly. Other projects on the anvil include the ARY Digital Tower, a 44 storey commercial and residential building in Dubai Media City, a 10 storey residential building in the International City and the ARY Aurum Plus, which is a state-of-the-art gold refinery at DMCC.

The state of the art gold refinery, ARY Aurum Plus, had been announced a year earlier but the project never went anywhere and was subsequently canceled.

"The beginning of the DMCC project by the visionary leader of Dubai and the establishment of the ARY Aurum Plus, is my dream come true. We have always wanted the city of Dubai to lead the world in gold trade, and DMCC is the ideal platform for the ARY group to flourish," [Haji Abdul Razak Yaqub] said.

ARY was into the marketing of the projects and/or lending their names to the project. The project development was outsourced and ARY never built in-house real estate project development capability.

ARY Residencia - Dubai

In 2004, the ARY group launched ARY International City Dubai Residencia project and aggressively marketed it through its TV channels.

According to the details the ARY advertised apartments in Dubai International City for sale on June 27, 2004. The advertisement clearly said, “pay only 30%” and guaranteed “70% financing through Islamic mode of banking” payable in easy instalments over a period of 15 years.

It was also committed that the allottees would get possession of their property “after two years” besides guaranteeing “annual rental income” that would offset the (70%) loan instalments under property management agreement. And the last attraction given was of Dubai’s “Residence Visa” to allottees on the basis of investment.

Then in 2006, when the apartments were getting ready for possession, ARY sent out cancellation letters to all the purchasers in Pakistan along with cheques for a 90% refund. You can read about it here, here, here, and here. The key takeaways are:

The shocker in each case was accompanied by the photocopy of a cheque containing 90 per cent refund of the principal amount they had paid to the ARY. They were directed to collect the cheque from the respective ARY offices in Islamabad, Karachi and Lahore.

The affectees see it as the worst ever offshore rip-off executed in a unique fashion where after circulating the people’s money in Group’s business for two years they are finally offered 90 per cent refund without any fault on their part. Most of the affectees, including military and civilian bureaucrats, doctors, academicians, businessmen and others, have refused to collect their cheques and are weighing different options including approaching the government on this, what they call, offshore swindle.

These affectees complain that the sorry part of the whole episode is that it is the ARY that has backtracked from its commitments made to the allottees. They say that the cancellation orders have been issued unilaterally and without any prior warning at a time when they were to get the possession of their apartments. It is said that the prices of these apartments have gone very high, a fact that might have prompted the ARY to cancel the original allotments and sell the property in the open market to earn huge profits.

The development of the project was outsourced to Nakheel (a Dubai government-owned entity). ARY was selling and marketing the project. The theory that ARY was canceling the allotments unilaterally to benefit from higher prices was substantiated by one of the purchasers

While most of the affectees have the same tale to share, one Kamran Niaz, who had the allotment in the name of his brother Hamdan Niaz Abbasi revealed that a letter dated May 6, 2006 signed by the ARY Regional Head Pervez A Malik in Islamabad confirmed to him that M/S Nakheel had completed his flat. He was asked through the same letter to update his payments as soon as possible. He said following this letter when he went to the ARY Islamabad office with the offer to pay the remaining amount (Rs 2 million), the regional manager ARY Islamabad refused to accept it. “A few days later I received the cancellation order,” he said.

Part of the problem was that Dubai based lenders had refused to lend to Pakistani residents. ARY should have offered the Pakistani buyers an option to arrange for the balance payment through the latter’s own sources. Anticipating huge profits, ARY canceled the allotments and made refund payments after deducting 10%.

most interestingly, hundreds of these Pakistanis are being refunded their partial deposit by the Dubai based ARY out of the recent US$10 million offered to the Group by the National Bank of Pakistan. The NBP has also agreed to give this loan to the company to save it from default in Dubai.

The NBP had offered this huge financing to the ARY despite latter’s figuring on the State Bank of Pakistan (SBP)’s list of top loan defaulters in Pakistan besides being prosecuted on “corruption” allegations by the National Accountability Bureau.

Purchasers were resourceful. They went to NAB, and surprisingly, NAB, for once, arranged the settlement between purchasers and ARY within a week.

On the timely intervention of the National Accountability Bureau (NAB), the ARY Group and the ARY Dubai flat affectees reached an agreement Tuesday that bounds the former to restore the cancelled allotments while the latter would deposit the outstanding amount by November 30 this year. According to a NAB source, NAB Deputy Chairman Major-General Muhammad Siddiq led the negotiations between the two sides for two days — Monday and Tuesday — and finally got the ARY Group and the affectees’ action committee to reach an agreement.

The following is the operative part of the agreement:

i) Allotments may be restored to those allottees who are willing to pay the amounts mentioned in schedule of payment ...

ii) Refund will be made to those allottees who are not interested in retaining these allotments. No deduction will be made by the ARY Group on account of this refund… Registration charges either received by ARY Group or by developer will also be refunded (since the flats being surrendered due to refund process will be resold by ARY Group/developer).

iii) Those allottees who are willing to arrange loans at their own from Pakistani/UAE banks, may do so at their own and pay the due amount along with delayed charges to ARY Group..

iv) No adverse media campaign would be run by either party. However, a positive media release may be issued by the affectees or by ARY Group, where role of NAB to provide relief to the general public and an amicable settlement is highlighted giving brief outlines of the settlement criteria…

v) All those allottees who would in this manner make 100% payments to ARY Group will be given a formal tri-party agreement between ARY Group, developer (M/s Nakheel), and the allottee. However, this may invite some re-location of flats to different buildings which has to be accepted by the allottees.

The re-location of flats to different building implies that ARY sold more flats than it had in its inventory. ARY had to do it even after some Pakistan based buyers could not arrange immediate paymentt for the balance of 70% implies that ARY did significant overselling.

"This issue has been resolved through the good offices of NAB before becoming a scam," Razzak said.

To summarize, ARY was aggressively marketing a project in Pakistan to resident Pakistanis promising

  1. 70% unconditional and a guaranteed loan from an Islamic bank based in Dubai

  2. Guaranteed rental income of 70% of purchase price

  3. Dubai residency visa

When it came to delivering on the aforementioned promises, ARY reneged on each and every promise.

ARY Residencia - Bahria Town Karachi

Malik Riaz had shown what to do when your regulator or partner refuses to go along in the scam. Find a different partner and/or regulator. Initially, Malik Riaz had gone with Abu Dhabi Group (ADG) for Bahria Town Karachi (BTK) but ADG refused to play along in the scam. Malik Riaz realized that an honest partner in a shady project does not make for a good business. Thus, in the next attempt, he went with Thomas Kramer who had questionable financial scruples and no qualms about being part of any scam. ARY could not launch any more projects in Dubai as Dubai Government has since established RERA (Real Estate Regulatory Authority) to crack down on misleading advertisements and faulty projects. Thus ARY decided to work with the devil himself, Malik Riaz, in the latter's most illegal project (the scale of encroachment in this project is unprecedented) by announcing ARY Residencia in Bahria Town Karachi.

Much-awaited ARY Residencia housing project launched in Karachi

KARACHI: ARY Group of Companies in collaboration with Bahria Town (Pvt.) Limited launched a housing scheme ‘ARY Residencia’ on Thursday.**

The joint housing project of the two renowned groups was formally launched by ARY Digital Network President Salman Iqbal and Chairman Haji Muhammad Iqbal.

These were 3-bedroom 200 sq. yards villas for Rs. 1.5 crores to be built in BTK Sports City. BTK collected a down payment of Rs.15 lakh from the buyers.

ARY waxed lyrical about its residential project management capabilities and its understanding of the real estate sector in the brochure. The truth is ARY ko kaddu nahin pata how real estate development works.

ARY is good at marketing blitz. The entire project development was being undertaken by Bahria Town with ARY only providing its name to the project and aggressively marketing it on its channels. ARY may be getting some kickback/commission from Bahria for this.

ARY did unleash a marketing blitz for the project even including the announcement of launch as "breaking news" in their news channel. Bahria Town CEO Shahid Qureshi promised to pay the first three installments of the lucky purchasers.

Click here to be taken to ARY Facebook page for the breaking news about ARY Residencia.

Subsequently, ARY News interviewed all the brokers who made claims about how the project is sold out and they are already engaged in resales activity a day after the launch of the project leading to investors making profits of Rs.1 lac to almost double on the down payment.

Plus many ARY morning show hosts and guests were enrolled in the campaign including Nida Yasir, Aijaz Aslam, Faisal Qureshi, Humayun Saeed.

Lo and behold. Rather true to form and unsurprisingly, the project doesn't exist. ARY doesn't respond to any correspondence concerning that project. Message from one of the purchasers

ARY Residencia does not have a legal office where one can contact them. The address mentioned on their letterhead is for ARY office Medina City Mall Karachi. When I tried to reach them i was stopped by security guard to enter the office. He called someone who told him not to let me in because ARY does not have any relation with this project. It seems that ARY residencia is a total fraud. One company named IQ properties keeps sending the reminder for the payments. It looks that ARY + Bahria town have fraudulently formed this fake company and collected 1.5M Rs from 1000s of Pakistanis as initial booking whereas this project and IQ properties do not exist at all. I am going to file a suit in court of Law against both Bahria and ARY for the refund of my deposit. I request all the victims of this scam to come forward with brief details of their deposits so that we may collectively fight this evil. You may forward your details to my email.

Bottom Line

ARY does not have any experience in developing real estate projects. What they have, by the truckloads, is firepower to market the projects through their TV channels, breaking news, morning shows, and Jeeto Pakistan.

** PHIR NA KEHNA KHABAR NA HUI **


Afterword

Powerful Friends

How can ARY commit such blatant skulduggery and get away with it? Malik Riaz has shown having friends in high places helps. The Profit magazine wrote a cover piece "The shady rise and rise of ARY Group". It was taken down. Some say it was ARY. Others say it was the boys as ARY was about to launch ARY Laguna with them. Whoever it was, the story disappeared from the web. It was published on August 8 issue of the magazine. All traces of that issue were removed as if the whole issue was never published.

ARY Laguna

I don't plan to cover the ARY Laguna project here. Just wanted to bring attention to the marketing blitz that is starting with hashtag #LaoLaguna. Fahad Mustafa's Jeeto Pakistan will be involved in some capacity.