Amritsar is rapidly turning itself from a sleepy border city famous for its Golden Temple into a bustling regional trading hub in anticipation of full liberalisation of trade between India and Pakistan sooner or later.

The city is only half an hour’s drive from the Wagah-Attari border and connects India’s businesses, especially from its state of Punjab, with their counterparts in Pakistan through the only land route being used by them for trading with each other, hoping to one day take them beyond Afghanistan to Central Asia via what is now described as the new silk route. And the corporate India is ready to wait for that moment no matter how long it takes.

A visit to the city and conversations with several Indian businessmen last week show that the city is in the grip of a property boom with its middle class population bulging fast. Several 5-star hotels and modern malls are already dotting its skyline to welcome guests from Pakistan and many are in the pipeline.

Major business groups like Tatas are investing heavily in property and insanely driving up real estate prices, expecting their investments to pay off massively once the unrestricted/freer trade and travel opens up across Wagah-Attari land link. While India doesn’t discriminate between trade with Pakistan through land, rail or sea, Islamabad allows only 137 items to be traded by land route. India has also developed a large Integrated Check Post (ICP) at Attari to handle rising cargo and passenger traffic to and from Pakistani side and plans to expand the facility further.

“There’s a lot of investment in property here because of expectations of improvement in trade relations with Pakistan,” said Suneet Kochhar, a director of Khanna Paper Mills outside Amritsar.

The optimism of the corporate India about the ‘bright future’ of bilateral trade is strongly shared by prominent Pakistani businesspeople like Mian Mohammad Mansha who expects property prices in Lahore to more than double within a year of opening up of unhampered trade (through land route), and are building mega shopping malls and hotels in Lahore.

Though businesspersons from both sides of the border are keen on doing business with one another, cargo trucks still move rather slowly across the border signifying a heavy presence of the unresolved trade related and political issues between New Delhi and Islamabad.

While direct, annual direct trade has surged from $1.8b to $2.6b in less than three years after resumption of the commerce secretary level trade talks in April 2011, which were suspended in the wake of the Mumbai attacks five years ago, the volume remains much below its estimated potential of $10b.

The preferred route for imports from India still remains the ‘third countries’ like Dubai and Thailand for what many call as hassle-free, containerised trade despite the fact that it increases freight costs and delivery time. Indian newsprint, for example, continues to be imported into Pakistan through Dubai because of a lack of containerised trade between the two countries across Wagah/Attari. “It also helps us get around the restrictions on land route trade,” a Pakistani importer said.

While India is pressing for free movement of all its exports via land route and free movement of cargo vehicles across the two countries, Pakistan wants removal of non-tariff barriers (NTBs), particularly related to quality standards, restricting access of its exports to Indian markets before it expands trade infrastructure at Wagah and implements the trade liberalisation roadmap agreed in September last year.

India’s commerce ministry officials say the issues of free vehicular movement across the borders and quality standards are being taken care of under the Safta banner. But many agree that even the implementation of Safta agreements largely depends on bilateral trade and political relationship between India and Pakistan.

“It is true that the tensions between Islamabad and New Delhi have held back swift progress on Safta. But it is now for Pakistan to decide if it wants to be part of the regional trade and economic cooperative effort or not. We are already boosting our trade and business ties with the other Saarc nations,” an Indian trade official told this writer in response to a question.

India’s trade with Bangladesh, for example, has more than doubled to $5.8bn since 2010. Similarly, its trade with Nepal has surged from $1.9b to $3.6bn and with Sri Lanka from $2.5bn to $4.6bn. Pakistan, on the other hand, has failed to boost its trade significantly with the Saarc member countries. Its trade Nepal is negligible and with Bangladesh $650mn and with Sri Lank $384mn.

“We have come a long way in last couple of years. But we have a longer way to go. Free, unrestricted trade via land route will benefit both the countries. If we get access to the Central Asian states, Pakistan will also have the opportunity to tap the potential Indian market of 1.3bn people and boost trade with other Saarc nations,” a Confederation of Indian Industry (CII) member said.

“Those who think our businesses will swamp your market are mistaken. Our trade balance with Bangladesh is heavily tilted in our favour. But has it destroyed Bangladesh? No; the import of raw materials from India has helped it establish its garments industry and boost its exports to $26bn. It is a win-win situation for both the countries. Pakistan must also think in these terms,” he argued.