This paper is intended to explore the extent of converting arable land for urban use and the pace of construction activities on the residential housing schemes. In most of the schemes more than half of the plots are inbuilt because by-laws are very flexible and owners of vacant plots have no fear of cancellation and they consider this investment a better safeguard against inflation. Moreover, speculators invested their money in the plots because no cost / taxes are involved in the keeping of vacant plots. By implementing strict by-laws and imposing capital gains tax on vacant land and converting the collected taxes from the schemes to create revolving funds for house building for really needy, low-middle income groups, the extent of conversion arable land into housing schemes can be reduced. Cities throughout the developing world are facing challenges as they attempt to cope with unprecedented population growth. They are considered the engines of economic and social progress that embody the diversity and energy of human pursuits Lash (1996). Moreover, they offer employment opportunities, entertainment, potential efficiencies and other amenities. Pakistan like other developing countries in the region has witnessed accelerated process of urbanization. The country experienced massive urban population explosion. This resulted in server pressure on the urban land and infrastructure of big cities. According to Siddiqi (2004) the total population of Lahore district was 6.32 million, while the migrants among them were 1.03 million, which constituted about 16.4 percent of the whole population. Thus the area is faced with growing educational, water, sanitation, conversion of arable land for urban use and other social problems because of squatter settlements that are rapidly emerging to house these migrants. The impact of urban area on the surrounding productive farmland is an issue of growing concern. Pakistan is one of the most urbanized countries in South Asia while its metropolitan city Lahore is the second highest as compared to other cities.