Property registrations dwindle amid tax hike

Dealers in Islamabad and Rawalpindi see their businesses suffer

RAWALPINDI:

The introduction of new taxes, increased stamp duty, and a hike of 20 to 40 per cent in the official minimum property rates have severely disrupted the property registration system in Rawalpindi.

According to sources, this change has resulted in a significant decline in new property registrations.

Where there were up to 100 registrations daily with the tehsil urban and rural registrar until June 30 of the previous fiscal year, only 140 registrations were recorded from July 1 to July 23 in the new fiscal year.

The impact of these new taxes has been profound, particularly affecting the property buying and selling market. Property dealers in Rawalpindi and Islamabad have seen their businesses suffer greatly. The deputy commissioner (DC) of Rawalpindi has removed all posh areas of the city, including Satellite Town, from direct district administration control, placing them under the jurisdiction of the Federal Board of Revenue (FBR).

As a result, FBR rates, which are 40 to 50 per cent higher than DC rates, now apply, and taxes and fees are imposed according to FBR regulations. This tax hike has led investors to withdraw their funds from the property sector to safeguard their investments.

The surge in new taxes has also prompted the use of alternative methods for property transactions. Property dealers have started obtaining power of attorney from sellers by paying the full property amount upfront. They then transfer the property to a close relative within a day or two to circumvent the new tax regulations.

This practice prevents the public from revoking the given power of attorney, thereby complicating the property transfer process.

From the beginning of the new fiscal year on July 1, purchasing property has become exceedingly difficult for non-filers, who are now required to pay a total of 45 per cent in taxes on the overall property price. Both buyers and sellers are subject to advance tax on property transactions, with filers paying 3 per cent and non-filers paying 12 per cent.

For a 5-marla property registration, the total cost includes 3 per cent capital gains tax for filers, 10 per cent for non-filers, 3 per cent advance tax for filers, 12 per cent for non-filers, and corporation tax of 1 per cent.

Moreover, a new special tax for non-filers is set to be implemented next week.

Malik Waheed Awan, Chairman of the Stamp Vendors Union, stated that the new taxes on property transactions have devastated the property business, leading citizens to find alternative methods and resulting in a record drop in government revenue.

He highlighted that the deputy commissioner has significantly increased property rates this year, with a 20 per cent increase in lower-income areas and a 30 per cent increase in developed areas, compared to the previous lump-sum increase of 10 per cent.

Hassan Shah, Vice President of the Property Dealers Association, pointed out that reducing tax duties would help revive the business.