Pakistan’s Faisalabad city aims to appoint a private developer to build and operate three industrial buildings and allied services as a public-private partnership (PPP), a senior official told Infralogic.

The project involves the expansion of the Faisalabad garment city project with the development of the purpose-built buildings, along with a commercial area for banks and other allied business services, said Muhammad Danish, head of projects at the federal Public-Private Partnership Authority.

The expansion will cover an estimated total construction area of 427,000 sq ft, he said.

The Faisalabad Garment City Company, which is already operating, is a government-led industrial infrastructure initiative spread over 38.9 acres as a fully gated and planned estate. It is focused on providing export-oriented facilities and support to small and medium enterprises in the garments sector, said Danish.

The expansion is structured as a PPP, with land provided by the government and the risks shared with a private developer, covered by a long term concession, he said.

The transaction structure allows the private partner to generate revenue from rental income from factory units, warehousing charges, service and common area maintenance, and solar energy charges.

To enhance bankability, the PPP framework offers 30% of the project’s cost as upfront funding via subordinated debt, which must be repaid after the full repayment of the commercial debt, along with 5% interest.

Minimum revenue guarantees have been structured for seven years, at most. Under this structure, demand risk is partially shared. While the private partner bears the risk of 50% of the revenue target, the remaining 50% can be covered through the guaranteed mechanism in the initial years, subject to actual performance.

The guaranteed coverage gradually tapers, reducing to a minimum of 30% in the last two years of the seven-year period.

The garments city houses conference halls, auditoriums, logistics and buying house offices, as well as container yards, warehouses and other amenities.

Often called the Manchester of Pakistan, Faisalabad is the centre of Pakistan’s textile industry, the country’s largest and oldest industrial sector, employing nearly 40% of the industrial workforce, and responsible for 6%–9.5% of national emissions, Abid Raza Khan, head of the department of business economics at Punjab University wrote in a paper last March.

While the industry is fragmented and faces challenges including high energy costs and dependence on coal‑based power plants, international regulations – particularly the European Union’s Carbon Border Adjustment Mechanism – pose risks to export competitiveness unless Pakistan accelerates decarbonisation.

The garments city PPP is currently in the transaction phase, with feasibility studies completed and competitive bidding initiated for private sector engagement.

The city’s advisory team includes IQ Capital, Arif Habib Dolmen REIT Management and legal counsel Nawaz Hussain Sikandar, said Danish.

The last date to submit bids is 25 March.