* Property prices jump as crime falls in Karachi
* Pakistani developers seek to fill housing shortages
* Critics say security comes at cost; future uncertain
By Tommy Wilkes
KARACHI, March 1 (Reuters) - Pakistani Abdul Qadeer gave up trying to build a block of flats in Karachi four years ago, when gangsters demanding $20,000 in protection money shot him in the legs because he refused to pay.
Now he is back, putting the finishing touches to one of several apartment complexes he is constructing, part of a property boom which he attributes to the security crackdown on Islamist insurgents and criminals launched in the city in 2013.
“The terror in people has been eliminated. Business is good,” he told Reuters, pointing to six scars left by the gunshot wounds.
Qadeer’s experience was not uncommon for those trying to do business in Karachi, home to more than 20 million people and with a reputation as one of the world’s most dangerous cities.
But with recorded crimes down sharply since paramilitary Rangers moved in to make its mean streets safer, property developers across the metropolis are looking to cash in on home buyers’ new-found confidence.
Karachi property prices jumped 23 percent last year to a record high, outpacing other large cities and the national average of 10 percent, data from property website Zameen.com showed.
Activists have accused security forces of human rights abuses, while the MQM, Karachi’s dominant political party, says the crackdown is effectively a witch-hunt against it.
In the narrow lanes of Qadeer’s working class Lyari area, the forces killed 200 people last year alone, said Zubair Habib, head of the Citizens-Police Liaison Committee (CPLC).
The police say they are often victims of attacks by armed criminals, and that the operation is working.
The clampdown also has a growing number of supporters, not least among a business community long frustrated by Karachi’s reputation for high rates of crime.
“In those areas where there was a law and order problem, people have started buying houses again,” said Arif Habib, head of one of Pakistan’s largest conglomerates.
Arif Habib Corporation is building a large housing scheme in Karachi, with enough land eventually to accommodate 30,000 units, and last year listed the country’s first real estate investment trust.
“We have the population. There is a shortage of housing and a lot of backlog,” Habib said.
Rising demand for property in Karachi may not reflect the Pakistani economy as a whole.
It grew at 4.2 percent in the year to June 2015, against a central bank target of 5.1 percent and below the 6 percent-plus economists say is needed to absorb new entrants into a labour force from a growing population of 190 million people.
The central bank said in December that the economy remained structurally weak, with low levels of tax collection, low capital investment and a struggling export sector all posing risks to growth.
At least some of the money pouring into Karachi real estate is also likely to be illicit, property experts said, with some investors seeking to avoid paying tax.
Official data on total property spending are not available, but land prices and project starts show a surge in demand.
Developers launched 134 residential and commercial projects in Karachi last year, up from 106 in 2014 and 72 in 2013, according to Zameen.com.
The 2015 total includes 40 projects stalled during the worst of the violence when rival ethnic groups, Taliban militants and powerful gang lords frightened builders away, despite a severe housing shortage.
Recorded murders in Karachi fell to 650 last year, a 75 percent drop from 2013, while registered extortion was down 80 percent and kidnapping by nearly 90 percent, according to the CPLC, which collates official police data.
Across the city from Lyari, billionaire Malik Riaz is constructing Pakistan’s tallest skyscraper, a 62-floor tower and complex of offices, luxury flats and malls with Arabian Sea views, scheduled to open next year.
Project manager Sajid Usmani said 80 percent of the apartments had been bought, with prices of 30,000 rupees ($287) per square foot well above the average for high-end Karachi flats.
Still, some developers fear the property boom might turn out to be a bubble.
In Lyari, rubbish litters pot-holed streets and locals complain about a lack of water, electricity and jobs, signs of broader weaknesses in Pakistan’s economy.
Crime rates could also climb again if the Rangers decide to wind down their lengthy operation.
“If they leave, the same situation will occur,” said Qadeer. “The criminals will come back.” ($1 = 104.5800 Pakistani rupees) (Additional reporting by Syed Raza Hassan; Editing by Mike Collett-White)