LAHORE: Real estate markets of Pakistan are likely to resume business in full swing this week after remaining somewhat stagnant for about a month as market players are confident they will be able to get maximum relief from Finance Minister Ishaq Dar in a meeting slated for Monday.
At present, real estate agents of Lahore and Karachi – two big markets of the country – are protesting against the increase in taxes and revision in the land evaluation mechanism in the 2016-17 budget announced in early June.
Govt may double tax on transfer of properties
However, some players believe that the government will take back the decisions, which will spur activities in property markets across the country.
“We hope the government withdraws most of the decisions taken in the recent budget,” said Mian Talat, a leader of realtors in Lahore.
He was of the view that the government would continue collecting taxes on the value of land set by the provincial revenue departments with some upward revision in the price of properties considered undervalued.
This way it is expected to withdraw the new law that calls for assessment of property values by experts of the State Bank of Pakistan and levy of tax on actual value of the property. Currently, a huge difference exists between government-determined and market values of the real estate, especially in Karachi.
In the budget, the federal government has also imposed 10% withholding tax on the transfer of immovable property in an attempt to increase tax revenues from the sector.
Real estate in Karachi to stay unaffected despite budget proposals
Most of the real estate sector is ready to accept the upward revision in the official land prices. In Lahore, the value of properties set by the district commissioners has been revised a few days ago, which has brought some of the most tradable properties in the tax net.
Such taxes are only applicable if the official or market price of the property is more than Rs3 million.
However, the stakeholders are not willing to pay federal taxes on land prices that will be evaluated by the State Bank of Pakistan and insist they want to pay taxes according to prices set by the provincial governments.
According to real estate agents, market activities have nearly come to a halt as no one can afford to pay taxes at such high rates.
Housing societies are taking an undertaking from those few people who dare to transfer their properties that they will pay taxes at agreed rates in the future. But most of the people have either stopped or reversed their deals temporarily.
Few areas are undervalued
Defence and Clifton Association of Real Estate Agents President Raja Mazhar said there were few areas in Karachi where property prices stood undervalued.
Karachi property prices soar after crime crackdown
“Most of the areas in the city are giving revenues to the government and the property is undervalued in only a few areas; we are ready to work with the departments concerned for a decent revision,” he said.
Mazhar claimed that real estate markets were in panic and flight of capital had begun, adding the government would soon realise aftershocks of the new taxes and legislation.
“It seems that the government has made the legislation without proper homework; it lacks the ability to implement its own laws,” he remarked.
The real estate players are hopeful that Monday will bring good news for them, but many are prepared to expand the scope of protests if things remain unclear.
“We will close our businesses and will stage country-wide protests if things do not turn around for the better,” Mazhar said.
The writer is a staff correspondent
Published in The Express Tribune, July 18th, 2016.