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Real estate sector representatives hint at giving strike call

ISLAMABAD: The representatives of real estate sector on Thursday hinted at giving a strike call after the government refused to accept their valuation of properties, which may prolong the on-going slump in the realty business.

The talks between the government and the real estate stakeholders were smooth until Wednesday but then things took a turn after both sides shared their property values with each other.

The property transactions have nearly halted since early this month after the government changed laws meant to determine “fair market value of the properties”.

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The government on Thursday divided the realty sector representatives into regions. It held meetings with representatives from Khyber-Pakhtunkhwa, Punjab and Islamabad territory. All of them refused to accept the government’s valuations.

“According to the government, the per marla value of property at University Road Peshawar is Rs20 million, which in our view is not more than Rs5.5 million,” said Peshawar Dealers Association President Mazhar Durrani after the meeting.

He said that in Peshawar the gap between district commissioner (DC) rates and the fair market value was not large due to increase in DC rates during the last few years.

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The government and the real estate sector representatives have been negotiating to find a solution to the problem of determining the fair market value of properties after the recent changes in tax laws.

The withholding tax on sale and purchase and capital gains tax are currently collected on the basis of DC rates. However, these rates are lower than the prevailing market rates.

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Now the dispute is over what the fair market value is, as both the government and the real estate dealers have divergent views.

Before holding talks with the property stakeholders, the government hired experts to determine the fair market value in 21 major cities. The realty sector representatives gave their own rates, which were significantly lower than the rates determined by the government-hired valuers.

Impasse

“It is very difficult to determine the real value of the properties – even in a single locality – due to difference of location of the undeveloped plots,” said Younus Rizvi, a real estate sector expert from Karachi.

He said all the Rs7 trillion was not black money, as people also invested their foreign-earned white money in the real estate sector.

“The gap between the DC rate and the fair market value cannot be bridged in one go,” said Raja Mazhar, President of Clifton and Defence Real Estate Dealers Association.

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The representatives from Peshawar and Karachi hinted at giving a strike call if the government did not accept their determined values of the properties.

“The real estate sector representatives have accepted that the DC rates were far lower than the fair market values,” said Haroon Akhtar Khan, Special Assistant to Prime Minister on Revenue, while talking to The Express Tribune.

He said the government would not let the spoilers play a dirty role and would try its best to keep the talks on the right track.

The market value, assessed by the government-hired valuers, was at least three to 15 times higher than the DC rates, said Khan.

The new determinations will become the base for giving a tax amnesty on the past transactions, estimated at Rs7 trillion.

“The only solution to the present impasse was the capital regularisation scheme,” said Kaleem Khan of KK Real Estate Karachi.

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However, experts are against an amnesty scheme for the real estate sector on the ground that it is not a job-intensive sector.

“The government’s determined fair market value rates were too high and the stakeholders would give their reaction after holding consultations,” said Mian Majid, representing the Lahore delegation.

Published in The Express Tribune, July 29th, 2016.