LAHORE: The government’s upcoming amnesty scheme to bail out the real estate sector from a gridlock situation has drawn mixed reactions from realtors in Lahore. The real estate sector has been hit hard after the government introduced enhanced tax rates on July 30.
Realty sector saga
While speaking to The Express Tribune, most realtors allege the new amnesty scheme cannot help tax authorities to bring real estate sector under the tax net.
DHA Estate Agents Association president Rafique Hasrat said the move will offer a win-win situation for the government and the realty sector. The amnesty scheme will bring out the realty sector from the present stagnant state and help in expanding market size, he added.
He further said the new amnesty scheme would offer an opportunity to investors to declare their properties and deposit 3% tax on the difference amount between the Federal Board of Revenue’s (FBR) fair price and DC value.
He maintained, “It is a wrong impression that investors have to sell their properties in a limited timeframe of the amnesty scheme.”
An estate agent from Wapda Town MA Siddiqui told The Express Tribune realty market had collapsed since the introduction of enhanced taxation on property transactions. Under the new amnesty scheme, he said, the government was planning to offer an opportunity to investors who bought properties before June 30, but what about the transactions that were materialised after this date.
He said the proposed amnesty scheme could not produce desired results, but it would only create distortion in the market.
Siddiqui underscored it was a wrong impression that one time discount in tax rates would help the market to pick up again. “Property taxation is purely a provincial subject. Over the year taxation on property transactions have already swelled from 1% to 8%. Now the government wants to further squeeze realty sector which is impossible as small or in some case midsize realtors had been kicked out of the business,” he lamented.
Another realtor from DHA Haroon Iqbal said most estate agents in Defence area believed the new amnesty scheme would also fail like previous schemes announced by the government.
He said under the new amnesty scheme, the government was offering a discounted tax regime for a limited period that would increase selling pressure which will not benefit the investor.
Earlier, the government, through an amendment in the income tax ordinance, moved to increase the rate of capital gains tax for properties sold before two years. A parliamentary panel on November 8 finalised a proposal to give yet another tax amnesty scheme to the real estate sector by offering investors to declare their hidden assets by paying a nominal rate of only 3%.
A subcommittee of the National Assembly Standing Committee on Finance formalised its recommendations after holding discussions with representatives of the real estate sector.
Its aim was to increase tax collection from the real estate sector that has long gone without contributing much to the national kitty. It went about achieving the aim by redefining property valuations, which were being traded in multiples of the old notified rates.
However, market experts say that both local and overseas investors are not reluctant to pay taxes, but their concern revolves around statements coming from the country’s top tax collecting authority, the Federal Board of Revenue, that call for a probe in to the source of money from individuals working in this sector.
After announcement of increase in tax, prices of major housing societies decreased faster than they did before amid increasing investors’ concerns over the future of the real estate market.
The number of property transactions witnessed a sharp decline since July in three major cities and very few investors were transferring properties. As per market analysts, the number of transactions in Defence Housing Authority of Lahore, Karachi and Islamabad declined by around 70%.
Published in The Express Tribune, November 11th, 2016.
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