Realtors express concerns as real-estate sector reels under new finance bill

New tax regime causes decline in income as operations come to halt

KARACHI:

The real-estate sector in Pakistan is facing a severe crisis following the government’s recent actions in the Finance Bill for the fiscal year 2023-24. Stakeholders in the industry are deeply concerned about the measures introduced in the bill, which have brought the sector to a standstill and raised uncertainty about its future.

President of Defence and Clifton Association of Real Estate Agents (DEFCLAREA), Johar Iqbal, along with leaders from various real-estate associations across the country, addressed the media in a press conference to highlight the challenges created by the financial bill.

“The bill has introduced several announcements related to the real-estate sector that have resulted in a significant downturn for the industry,” stated Iqbal during the conference. While the initial announcements in the financial bill raised hopes for relief, subsequent additions have had the opposite effect, pushing the real-estate sector to the brink of collapse. The industry, which was once a major employer in urban areas, is now facing a critical situation, leading to widespread unemployment and significant revenue loss for the government.

Traditionally, the real-estate sector has been a vital avenue for investment, attracting funds from both local investors and overseas Pakistanis. However, the current situation is quite different. The introduction of a new tax regime has led to a surge in taxes for existing taxpayers, subjecting them to double or even triple taxation on their previously taxed income. This has caused a decline in income as operations in the real-estate industry have come to a halt.

With interest rates in banks reaching above 20%, potential investors are finding it unappealing to invest in any other avenue. Additionally, the imposition of an 18.5% tax on non-filers has further dampened the sector’s growth prospects, discouraging potential investors, said Iqbal.

Real-estate associations have raised concerns about the government’s approach towards real-estate traders, treating them as if they possess ‘limitless wealth’. They argue that a large proportion of non-filers earn their wealth through agriculture, which is not taxable. Instead of burdening the real-estate sector, they suggest that the government should focus on bringing non-filers into the tax net.

To revive the real-estate sector, the associations call for the resumption of the policy of imposing Capital Gains Tax, with a tax rate of zero for properties sold after four years, indicating that the buyer is a common man and not an investor.

They advocate for the elimination of the ‘Deemed income tax (7E)’, as it is an assumed wealth tax rather than a real tax. Additionally, they urge the government to expedite the return of advance withholding tax to tax-filers within 60 days.

For the benefit of the lower-income group, they recommend lowering the tax exemption threshold to Rs6 million, sparing this segment of the population from the burden of taxes.

Moreover, the real-estate sector should be included in the agenda of the Special Investment Facilitation Council (SIFC) to attract foreign investors.

Published in The Express Tribune, July 23^rd, 2023.

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