The real estate sector of Pakistan sees another period of difficulties as its stakeholders claim that they are in a state of panic due to recent statutory regulatory orders (SROs) issued by the Federal Board of Revenue (FBR).
The FBR issued two SROs - SRO 773(1)/2020 in August and SRO 924(1)/2020 at the end of September - which pertains to the realty sector.
SRO 773(1)/2020 stated that banks would be required to report customers to the FBR in case they make payment of Rs1 million or more or deposit Rs10 million or more during a month. SRO 924(1)/2020 said that all real estate agents will be liable to provide information of sale and purchase transactions and their ultimate beneficial owners to the FBR besides having to perform strong customer due diligence.
In addition to that, it also said the tax collecting authority can conduct on-site inspection as well, if required. Both SROs have created a wave of panic among people associated with the business, especially SRO 924(1)/2020, because it relates to anti-money laundering and terror financing regulations. The SRO is crucial for Pakistan because it relates to recommendations of the Financial Action Task Force (FATF).
In the backdrop of the two SROs, the realty market of Lahore has issued a warning to both investors and real estate agents, fearing that the sector would see a possible decline in the coming days and property prices may spiral downwards after December 2020. “Previously, the market was enjoying some relief but these two SROs, along with the order for agents to keep record of investors, is creating panic amongst us,” said DHA Estate Agents Association former president Mian Talat while talking to The Express Tribune.
The market has gained around 30% in the last four months mainly due to the amnesty scheme and reduction in interest rate.
“This amnesty scheme is set to expire on December 31, 2020 and it will not be extended due to measures being taken to remove Pakistan from the FATF grey list, however, the construction sector will still benefit,” Talat said.
Published in The Express Tribune, October 8th, 2020.
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