Real estate investors still wary of amnesty scheme

Believe FBR may ask them about source of income at a later stage

LAHORE: The amnesty scheme recently approved for the realty market of Pakistan has not caused much excitement among stakeholders as they are sceptical about what the Federal Board of Revenue (FBR) is offering.

The reason behind this suspicion is public perception of the tax collecting body, which is not at all satisfactory in dealing with individuals and different associations of the realty market.

Though the FBR and Ministry of Finance have repeatedly announced that no one will ask about the source of income and assets of any individual who will opt for the amnesty scheme, market people are not ready to believe their words.

“Markets are not taking the amnesty scheme seriously and 90% of players believe that tax authorities may ask them about the source of income at a later stage,” said Azeem Saddiqe, a realty market expert, while talking to The Express Tribune.

“We know it has been passed by parliament but what if they amend the policy; people are not afraid of declaring their income, they are afraid of the FBR tactics that are often used to harass taxpayers,” he added.

Since the introduction of a new taxation system in July this year for the realty market, it has been under-performing. Market leaders and FBR officials along with Finance Minister Ishaq Dar have held many meetings to resolve the issue.

Now, the government has come up with a scheme that says real estate investors can keep 97% of tax-evaded money by paying only 3% tax.

Over the past five months, the investors have either sidelined or shifted their money to Dubai’s real estate market and only real purchasers are injecting little bit of money into the market.

Apart from this, most of the property transactions are being done in cash, contrary to the previous practice of making payments through bank pay orders, to keep a lid on people’s real wealth.

“People do not believe in the FBR and its statements that they will not ask about the source of income,” said Mian Bilal Hanif, Chief Executive Officer of Estate Heights.

“The market is digesting the increase in taxes but investors are not ready to declare their source of income; we still hope for some improvement in coming months.”

Interestingly, the new taxation system is helping the market as genuine buyers are replacing those investors that set the trend of buying or selling properties in a particular area.

“People showed some resentment in the beginning when taxes were increased, but later they started accepting the new property transfer prices, which were not as high as the market had anticipated,” said Abdul Ghaffor, CEO of Pak-Properties.

“This probably will help the market in achieving maturity, however, the amnesty scheme has once again hit the investors hard.”

At present, market people are not hopeful that any satisfactory conclusion will emerge from all the measures taken by the government in the current fiscal year.

Most of the stakeholders are not interested in further raising their voice for the time being. Pointing to the perception that around Rs7 trillion is parked in the real estate market, they say it should be checked how much money now remains in the country.

“We are not considering any protests or negotiations, investors are not interested in Pakistan’s realty market, so for whom we should make efforts,” Saddiqe added.

Published in The Express Tribune, December 11^th, 2016.

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