Efficient management of state-owned land and its use in accordance with the needs of cities is essential. If it is underutilised or used for non-productive purposes, it becomes a liability that affects the state and restricts the development of cities. In Pakistan, most state-owned land is underutilised, making it crucial to manage these resources efficiently. Unfortunately, inefficient management and poor handling of these resources in Pakistan are classic examples of dead capital.
What is Dead Capital?
Dead capital refers to an informally held property, not legally recognised and cannot be exchanged for financial capital. The uncertainty of ownership diminishes the value of the asset and the ability to lend or borrow against it. Similarly, assets that are underutilised and used for unproductive purposes are known as dead capital. For instance, the land has the potential for high-rise construction when used for single-storey housing, using land with a high market value at a prime location for noneconomic activities, etc.
Dead Capital in Pakistan
According to research, the value of dead capital only in urban areas is around Rs 300 billion (PIDE, 2022). However, only a little action has been taken so far to unlock this dead capital, which can generate revenue and enhance much-needed economic growth. Furthermore, the public sector alone (in the form of various government departments) holds property worth trillions of rupees all over Pakistan without use. Thus these underutilised properties constitute dead capital since they can’t be used in the wealth creation process. Even the ones in use mostly form a non-productive venture and occupation of prime land for nothing.
Possible Steps to Unlock the Dead Capital
Some of the sustainable uses to solve the problem of dead capital are:
According to the PIDE study, a substantial amount of dead capital can be unlocked by promoting vertical expansion in the cities by transforming single-storey houses into high-rise buildings. With the increasing population of Pakistan and land scarcity, the promotion of vertical construction is the only sustainable way forward to overcome these challenges.
Government must take action to efficiently manage these non-productive lands or properties to utilise these resources fully. The state and its entities can form a database with a centralised record of the land and the land proportion.
Also, a team of professional asset management experts should assess the land value to achieve accurate figures for the land. After this, the land must be used for productive purposes so that it can be utilised in a way that its full potential is unlocked.
Due to poor regulations and master plans, state lands are underutilised and used for unproductive purposes, which turns them into dead capital. Given the consequences of dead capital, it is mandatory to tackle this issue seriously. Utilising dead capital efficiently will raise economic activity and creates wealth. It can be unlocked by encouraging the vertical expansion of the building, efficiently utilising the land and creating a land valuation system.