This post refers to pictures. Unfortunately for copyright reasons, I cannot upload those pictures as then this post will be taken down. However, I have uploaded those pictures in a Twitter thread. If you are reading this on a desktop, all you have to do is to open the below Twitter thread in a separate tab and refer to picture numbers in the thread.
Purchasers should not assume that their investment in ARY Laguna is secure just because this project is in partnership with DHA. In my second post on ARY Laguna, I had intended to cover the shenanigans of DHA, ARY's partner in crime in Laguna, as DHA isn't above scamming investors. But that post has to wait as ARY has announced the launch of booking in Laguna and I wanted to get this analysis out. Most likely this will be the last post on the topic as speculators are going to speculate no matter what I write. My hope is that these two posts serve as a chronicle of how the Laguna project came about.
New readers can familiarize themselves by reading my earlier posts. The first post on this topic ARY Laguna Scam? History Rhyming hinted at ARY's real estate track record of not delivering on its promises when it comes to real estate. For an entertaining account of how fraud takes place in broad daylight with investors suspending common sense to make a quick buck, read Greed Unlimited: Bahria Town Karachi.
This post is in two sections. The first section provides background knowledge that will help explain the steps ARY is taking in marketing/selling the project, which is covered in the second section. If short of time, go directly to the second section.
Section 1: Setting the stage
This section covers two topics. Platinum Real Estate Agents' (PAs) business model and a short excerpt from the launch of Bahria Town Karachi.
Platinum Real Estate Agent (PA) business model
ARY has appointed PAs to market and sell the apartments on ARY's behalf. PAs invest significant time and capital in marketing a project. PAs make money in the following manner.
A developer sells booking forms in advance to PAs for cash at a price that is at a discount from the market price. For example, the market price of a form announced by the developer may be Rs.15,000. The developer will sell the forms in bulk to PA for Rs.10,000 cash. This provides developers with cash infusion right away. It motivates the PA to market the project aggressively as they will now get Rs.5,000 whenever a purchaser buys a form from them.
Each form has the name of PA mentioned on it. If the buyer of the form ends up buying an apartment or a plot, the developer gives a kickback from 2%- 5% of the plot/apartment price to the PA.
Developer sells plots/apartments to PA for a discount. In the case of Bahria Town Karachi, the majority of the real estate brokers have bought plots from Bahria. When you buy a plot through an agent, it is technically being sold to you from PA's inventory. PA is making money for the difference between market rate and discount rate.
The developer also sells already pre-approved booking forms to PAs. Reportedly these are apartments that have been taken out of the balloting pool as "PA’s quota". The buyers of these pre-approved forms are guaranteed to receive apartments/plots when 'balloting' is held. Such forms are usually allocated to PAs based on the number of forms they sell providing additional motivation to PAs to sell the maximum number of forms. It is PA's discretion on how he wants to use these forms: sell these at a premium as they are guaranteed to win an apartment or sell them to their most lucrative clients i.e. those that buy the maximum number of forms.
Thus PAs invest significant capital (buying forms, plots, apartments) and time (marketing and hyping the project). In return, PAs are guaranteed lucrative returns. If you are thinking, PAs are investing their own capital in the business, you couldn't be more wrong. There is one additional manner PAs and real estate agents generally make money. By charging fees for asset management/advisory. All PAs have investors who provide the capital to invest.
The PAs use this capital raised from investors to buy forms/plots/apartments. When the profit is realized, PAs take around 20% of the profit as advisory fees.
Being a PA or real estate agent is a pretty lucrative business. The best part. It is all cash-based and the income that PAs and their investors make is tax-free.
Bahria Town Karachi
Bahria Town launched Bahria Town Karachi project with the announcement of registration form. The registration form for plots was Rs.15,000 and didn't entitle the buyer to anything other than a right to apply for booking the plot when the booking will be launched.
So the premium on Bahria Town registration slip of Rs.15,000 has reached Rs.195,000 in less than two months if all the SMSs and emails are to be believed. That is a 1,300% return in less than two months. For a “piece of slip” which has nothing behind it (the slip entitles you to nothing) yet people are falling over one another to buy it, it boggles the mind.
Subsequently, Bahria Town announces booking. If you want to apply for a plot in the project, you now have to apply for a booking by submitting a token payment of approximately 10% of the plot price. To increase your chances of getting a plot in the booking, you have to submit multiple booking forms. The registration forms that you bought earlier, provide you with no advantage now.
I have friends who submitted 2, 3 & 4 booking applications fearing that they might miss out on balloting. Another friend took some of them to a Bahria Town nominated estate agency in Defence and paid a bribe of Rs.15,000 per application to ensure that their application gets selected. This was in addition to the premium if any, they paid for the registration forms.
Now that the stage has been set, let’s see how ARY went about its sales and marketing of the project.
Section 2: Project Progress
February
The project was first announced in February. As is customary for ARY branded projects, it was announced on ARY news. Waseem Badami acted as master of ceremony at the event that was held in DHA City. The guest of Honor was Corps Commander Karachi Humayoun Aziz and the Naval Chief. Salman Iqbal unveiled the project saying that he wants to bring resort style living in Karachi in the style of Seychelles, Maldives, and Thailand. You can watch the video on ARY official youtube channel below.
He also mentioned that the project will have the tallest tower and the biggest mall in South Asia. There will be technology transfer to Pakistan as 80% of the material will be sourced locally; material such as "doors, handles, kitchen and basins" and this will lead to job creation. ARY will also be establishing the largest real estate brokerage company Vision Holding with 25 offices nationwide.
Both Waseem Badami and Salman Iqbal stated that the ARY Laguna project will put Pakistan on the map of the world. Down on his luck Thomas Kramer also said about Bahria Town's Bundal Island scam/scheme
Now it was all over thanks to a Swiss court ruling in January that Kramer had to repay nearly $200 million to a German currency-printing dynasty. His appeals were up. Everything had to go — the house, the staff, the jewelry, the extensive cellar of vintage wine, even the taxi-dermied giraffe that greeted visitors in the hallway. Because of my job in Kramer’s mansion, I had a unique front-row seat for his last days in Miami Beach. I saw one man’s desperate efforts to salvage his name and his livelihood, afraid but hopeful that some last-minute opportunity would save him from financial ruin.
In fact, by the time he dismissed his staff, Kramer had already found the man he believed could be his long-shot savior: a scandal-tarred Pakistani plutocrat named Malik Riaz who wanted a partner to build a $20 billion island city in Karachi. Riaz, Kramer said that morning between sobs, was his last best hope. “This is a once-in-a-lifetime chance to bring Pakistan back on the map of the leading nations in the world,” Kramer later said of the project.
November 11
ARY Laguna was officially launched on November 11. The event was titled "Unveiling Platinum Agents" and it was held in DHA City. It seems that ARY will not be setting up the largest real estate brokerage company. Probably ARY didn't know how the PA model works. Understandable as Bahria Town managed the sales through Bahria's agents for ARY's failed ARY Residencia project in Bahria Town Karachi. ARY may have realized that setting up 25 agencies will require significant overhead on account of rental for the space, utilities, and salaries of the staff.
While appointing PAs brings in cash from PAs and their investors, setting up an estate agency will require ARY to spend cash. Or it could be that the statement about the largest estate agency was just hot air as will the statement about the tallest tower and the largest shopping mall in South Asia will eventually turn out to be.
If you see the list of ARY PAs, they aren't the usual suspects. ARY could not line up a large number of PAs as most of the bigger real estate agents have their investors' capital stuck in Bahria Town and weren't keen on selling ARY Laguna:
Laguna or DHA City taking off means that their capital is stuck for longer in Bahria as prospective buyers are now diverted to Laguna.
Investors having burnt their hands with PAs in Bahria aren't willing to provide them more capital till their existing capital is recouped from Bahria.
November 17
ARY announces the availability of the registration/application forms. Purchasers can buy these forms from PAs, fill in the details and then submit it with Rs.16,500 membership fee to the same PA.
Terms and Conditions of the application form are in Picture 1.
Key terms are
It is a membership form and not a booking form
The form should be treated as an expression of interest.
The cost of the form is Rs. 16,500. In case the applicant is unsuccessful in the ballot and requests a refund, only Rs. 10,000 will be refunded after deducting Rs. 6,500 processing charges. Alternatively, the applicant can have the form used towards other projects of ARY.
Submitting this form will confer no rights to applicants whatsoever.
Launching a project with a membership drive is the standard Bahria playbook. When Bahria announced Bahria Town Karachi, the public went crazy for the membership forms despite the fact that the form doesn't entitle anyone to anything. The form clearly stated, purchasing the membership entitles you to nothing whatsoever.
ARY was marketing the project on ARY News channels as well as ARY entertainment channels. ARY was expecting unprecedented demand and as such, made the form available directly on their website too. This means that buyers who have internet access and a credit card do not have to visit the PAs. This was a noob mistake as will become obvious from ARY's later actions.
November 20
The response wasn't as overwhelming as ARY expected. Three days after announcing the availability of the forms on the website, ARY announced that due to overwhelming response, forms will be made unavailable on ARY Laguna's website on November 25th implying that forms can still be purchased from PAs after the November 25 date. Probably PAs complained that prospective buyers are buying forms online and they have this huge inventory of unsold forms lying with them.
It is a frigging membership form. It doesn't entitle the buyers with any rights whatsoever. Have as many people buy the forms as you want.
After this announcement, the scam starts picking up steam. The real estate agents, both PAs and others who had downloaded forms from the website or acquired them from the PAs, went on a marketing spree that there is a shortage of forms and these can be bought for Rs.17,500 ( a premium or "own" of Rs.1,000).
Though not officially announced, a large number of brokers started marketing a 10 form offer. If the purchaser buys 10-forms, he is guaranteed to win an apartment in a ballot.
November 25
On the 25th of November, ARY extends the date for one more day till 26th. Weird considering that 25th was announced due to overwhelming response. Then why was the date extended by one day?
On the night of the 26th, ARY makes the online form unavailable on its website. Prospective buyers can now only buy the form from PAs. Reportedly, as per PAs, the premium on the form has gone up to Rs.10,000 per form. Some brokers were marketing the 10-forms at Rs.265,000 (i.e. Rs.16,500 per form and Rs.10,000 per form premium).
There is no announcement from ARY about this 10-form scheme. I will repeat it again. As per T&Cs of the membership form, it is explicitly stated that the form does not entitle the purchaser to anything and it is not a booking form. Thus if a purchaser does not get an apartment even in the 10-form deal, there is no legal recourse as T&Cs explicitly state that purchasers of membership form have no rights.
There is no official communication from ARY with respect to the 10-form deal. PAs also say that the 10-form scheme is available if the forms are bought from PAs only (from the PA quota). If a buyer had submitted 10 forms online, this does not make the buyer eligible. Also the scheme is also not applicable even if buyer had bought 10 forms from PAs but did not buy them under the 10 form scheme i.e. if the buyer had bought the forms specifically under the 10 form scheme, only then the PA would have sold one of the pre-approved forms as part of the 10-form. All of this is unofficial. It is as if PAs are trying to offload all the membership forms.
Let me reiterate. These are membership forms and not booking forms. Prices of apartments also haven't been announced yet.
November 30
ARY now announces that applicants should get their forms verified (see Picture 2). The form can be verified by visiting an ARY sales office or PAs. The PAs will send the forms to ARY for verification and stamping. Those who submitted the form online do not require verification. ARY emphasizes that only those with verified forms will be eligible to apply for booking.
The communication from agents was that they already have blank pre-verified forms available with them in case anyone who missed submitting the forms by due date and wants to buy the form now. My guess is that PAs are still sitting on tons of forms and this is ARY trying to drive interest in the forms and getting prospective buyers to buy more forms from PAs.
December 16
ARY sends sweet surprise notification to PAs. (see Picture 3)
The headline of the notification reads that it is for the benefit of the existing clients as well as those that didn't buy. The last membership application submission date has passed on November 26 when ARY itself stopped the availability of forms on its website due to the overwhelming response. How is ARY sending this notification to its real estate agents to reach out to prospective buyers when all the dates have passed? Unbelievable.
Was ARY lying when it said that there has been an overwhelming response and made the forms unavailable on its website? Was ARY lying when it stated that the last submission date is November 26?
The notification is full of typos and grammatical errors. If ARY is launching a product that is going to put Pakistan on the map of the world, at least spend some money on MS Word. The red squiggly lines under the typos would have helped correct some of the mistakes. This substack post may have a few typos too for which I apologize, but at least I am not trying to swindle you out of your money or claiming that this substack will put Pakistan on the map of the literary world.
Back to the notification. The 10-form guaranteeing one unit scam is now official. Official as far as Platinum Agents are concerned. This notification was not for the consumption of the general public. The key points are
ARY will adjust the application fee of the 10-form buyer in the purchase price of a unit. This means ARY will be absorbing the PA's profit. ARY sold the form to the broker for say Rs.13,000 but it is adjusting Rs.16,500 in the purchase price. As the prices haven't been announced, ARY can easily increase the prices to adjust this expense.
In addition, those who bought multiple forms will also get a bonus adjustment of Rs.5,000 to Rs.13,500 per form translating into a benefit of Rs.50,000 to Rs.135,000 for a 10-form buyer.
If the buyer is buying two, three, or a four-bed unit he can adjust 20 to 30 forms i.e. a benefit of Rs.100,000 to Rs.405,000 in one unit.
In addition to the above, ARY will give another benefit of Rs.100,000 on the purchased unit.
Summing up all the benefits, by buying multiple forms, a buyer can avail himself of a benefit of Rs.570,000.
Who gives the benefit of Rs.570,000 for buying forms for Rs.165,000? When I was working at II Chundrigar Road in 2003-2005, KFC used to sell us a coupon book for Rs.1000 with coupons value of Rs.2000. The benefit to KFC is they get more customers thus dividing their overhead over a larger number of orders. Never ever heard of selling real estate like this.
Does ARY expect to put Pakistan on the map of the world by following a Groupon model of marketing real estate?
Moreover, the PAs are selling the 10 forms at an "own" of Rs.100,000. What is the point of announcing platinum agents if PAs are going to sell the form for premium?
I am at a loss to understand what sort of marketing (if we can even call it marketing) is this:
People are buying a membership form. The membership form allows you to apply for booking in ARY projects. Prices of units have still not been announced. The notification is only sent to PAs and not available on ARY Laguna's website or any public forums. The forms clearly state that buyer of the form has no rights whatsoever.
Mid-January
On certain online forums, ARY releases this payment plan (see Picture 4) which requires a token payment of 5% of the apartment price at the time of application. This is also what Bahria did earlier.
If a buyer had bought two membership forms to increase his chances, he has been taken for a ride. Technically, an applicant becomes a member once and then can apply for as many bookings as he likes by depositing the token money with each booking application. Assuming a Rs.50 lakh apartment, each booking application will require the applicant to deposit Rs.250,000. Multiple membership forms should not help here. This is completely in line with T&Cs of the membership form.
January 23
ARY, on its website, states that each form that has been bought for Rs.16,500 is worth Rs.50,000 (see Picture 5)
Only forms that have been bought from PAs and verified will qualify for this. The way it is supposed to work is that instead of Rs.16,500 getting adjusted in the purchase price, each verified form will allow you to get an adjustment of Rs.50,000 per form. The number of forms that can be adjusted for each type of apartment will be announced later.
ARY airs an ad encouraging everyone to buy forms. CEO of ARY, Salman Iqbal, tweets the ad from his Twitter account.
If for nothing else, enjoy it for Mohamed Aamir holding a PS controller supposedly playing a video game while the TV is showing a cricket game. Even Sohail Javed who directed this ad could not provide this scam any legs to stand on.
While the GameStop rally was taking off, people in Pakistan and Middle East were wistfully looking at retail investors in US who were making easy money in stock exchange. They should not have felt left out. Where else can you invest in something for Rs.16,500 that is valued at Rs.50,000.
It appears ARY just wants prospective buyers to buy forms from PAs.
January 27
ARY announces a final date i.e. Feb 10 by which forms can be verified. The date falls two and a half months after November 26, when the forms were made unavailable citing overwhelming response. ARY also announced that booking applications will be accepted from February 15 (see Picture 6).
The prices of apartments are released (see Picture 7).
The price of each unit ends in 786.
There is an old joke with respect to the construction industry in Pakistan. It states that a devil was weeping in front of an illegal under-construction building. People asked him why you are crying. He said that I compelled the developer to break all the rules, encroach on the property and cut corners when building this project. But now that building is taking shape, the builder instead of thanking me is thanking the Lord as every balcony is adorned with ھذا من فضل ربی.
The number of forms that can be adjusted in each type of apartment is also announced (see Picture 8).
The payment plan is announced (see Picture 9).
The payment plan does not make reference to the token payment required for booking. ARY removed the condition of token payment with booking applications. Does this mean that one member can apply for as many applications as he wants? That doesn't make sense.
Alternatively, each booking form may require attaching a verified membership form. This will defeat the purpose of having separate membership and booking form as now a membership form is acting as a booking form.
Do those that have purchase 10 forms attach all 10 forms to a single application? What about those that have bought two or three forms?
It appears ARY is itself confused about how to go about scamming the applicants as they keep changing the rules.
Refer to the table about form adjustments. The first line states that for a person who is unlucky enough to win the apartment, he can adjust 5 forms for a down payment and five forms towards installments payment. For forms valued at Rs.50,000, this translates into Rs. 250,000 adjustment in down payment and Rs.250,000 payment in installments.
A small digression. If a credit card offers discounts at a particular retailer, it is always best to use that credit card and avail the discount at that retailer. The retailer cannot price discriminate against those that use that credit card and those that use cash. To offset the cost of the discounts, the retailer increases the price of the goods for everyone. As a result, those that pay in cash end up subsidizing the cost for those that pay with a credit card.
ARY will follow a similar strategy. To offset the cost of 10-form adjustment, ARY would have increased the cost of each apartment by Rs.335,000 (the difference between Rs.50,000 value and Rs.16,500 cost multiplied by 10 forms) for everyone. Anyone who is unlucky enough to win the apartment on a ballot with only one form will be paying Rs.335,000 more than someone who has bought 10 forms. If the buyer is thinking that buying 9 more forms, he will be getting a fairer deal, he couldn’t be more wrong. The best way to avoid losing money in a casino is to not play the game at all.
Anyway, as has been the trend so far, it appears the objective of ARY is not to sell apartments but to sell forms.
PHIR NA KEHNA KHABAR NA HUI
Bonus Features
What is wrong with the project?
The payment plan comprising of 1% per month payment is absurd. Reportedly there are 5000 apartments in the projects. ARY will require a team of accountants and recovery agents to follow up with 5000 buyers every month for their installments.
Building South Asia's tallest tower and largest mall require significant capital which neither ARY nor DHA has.
What about bank loans? Banks usually provide loans to developers which have a track record of development and a good reputation both of which ARY clearly lacks.
Secondly, banks finance those projects where they know they will get repaid. Usually, in such projects, the buyers have mortgages. The bank knows that as soon as the project is complete, the mortgages will kick in repaying the construction loans.
Thus banks will have no qualms providing construction financing to Dolmen Group or Emaar.
In ARY's case, ARY is offering a 1% per month installment plan. The buyers have no motivation to ask for a mortgage. Thus banks do not know if the funds will be there to repay the construction loan. ARY is saying 5 years to construct. As ARY will be constructing the project from depositors' money which will be trickling in at the rate of 1% per month, ARY will be lucky to have completed construction in 10-15 years (provided the intention is there to complete the project).
The illusion of Scarcity: Everyone plays this game. ARY is trying to portray a scarcity of forms yet is consistently failing. Part of the reason is people have burnt their hands running after similar illusions in Fazaia, Bahria and DHA City and neither have the courage nor the funds to deploy in other such schemes. Part of the reason is people are aware of ARY's track record of not delivering as covered in the earlier post. However, you have to give it to ARY that it is consistently trying to sell a limited number of forms and limited time. One thing that ARY has not been selling is the apartments. It appears that there is no scarcity of apartments.
Platinum Agent is still selling membership forms on February 2.
Looking forward to this landmark project putting Pakistan on the map of the world.
Powerful friends
Launch of ARY Laguna - DHA Karachi
The event was attended by various celebrities and personalities, as well as the honorable Chief Guest Corps Commander Lieutenant General Humayun Aziz and Administrator DHA Brigadier Rai Asim Mustafa.
