Member Direct Tax Policy Israr Rauf told The Express Tribune “we have taken this decision for the development of construction sector and encouraging the formation of the trust.”
He said REITs were given tax exemption earlier as well because at that time capital value tax was in place and no concrete steps were being taken to set up the trusts.
Now capital value tax on sale and purchase of property has been transferred to provinces and its rate has been reduced to two per cent from four per cent.
He said small scale investors will get an opportunity to invest in the trust and the trust will buy plots at market rate which will help make the property sector work with documentation and people who show lesser value of the plot will be exposed.
The price on which the trust will purchase plots in an area will become a benchmark price for other properties of that area. This way tax net and tax returns will increase, he said.
Some time ago, the Securities and Exchange Commission of Pakistan (SECP) proposed a reduction in the size of Real Estate Investment Trust fund from Rs5 billion to Rs2 billion.
“This will address the issue of capital constraints for launching REIT projects and will enable even medium-sized projects, having better potential for growth and return, to qualify for REITs,” the SECP said.
The SECP has proposed significant amendments to REIT Regulations 2008 to make it more conducive for investment. The regulator said that it has consulted market participants for the amendments, which will facilitate in launching REITs in Pakistan.
Published in The Express Tribune, June 30th, 2010.
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