Regulatory Burden and Market Inefficiencies: The Growth of Extra-Legal Housing Societies in Islamabad

Abstract

Throughout human civilization, housing has been a fundamental requirement, initially based on familial and societal needs. Today, housing continues to be a vital aspect of human civilization, offering shelter, security, and a sense of community worldwide. The primary objective of this research paper is to analyze in detail the factors (information asymmetry, regulatory burden, sludge) that lead to the mushrooming of extra-legal housing societies  in Islamabad and how these societies provide an alternative in the context of market failure. These societies don't have official registration and other relevant documents with the appropriate institutions and operate outside the law. We have employed a mixed-method approach, incorporating both qualitative and quantitative data collection techniques. Findings revealed that it takes the CDA, on average, about two and a half years to approve a No Objective Certificate (NOC) for a housing society. However, it is important to note that the timeframe can vary significantly, as the minimum recorded duration for NOC approval stands at 74 days, while the maximum duration reaches a staggering 3460 days. Moreover, commercial and residential prices in legal societies are notably 80% more expensive compared to extra-legal and illegal counterparts. To promote sustainable urban development and prioritize the well-being of consumers this analysis offers possible solutions like strengthening the capacity of the Capital Development Authority (CDA), establishing a specialized unit, ensuring compliance with initial plans, digitizing procedures, implementing a single-window system, and addressing non-compliance tendencies.