Investors, agents say new DC rates excessive

LAHORE: Investors are losing interest in the property trade in the Defence Housing Authority (DHA) due to the recent revision of the schedule of presumptive value also known as DC rates by 15 per cent up to 50 per cent and the introduction of 2 per cent Capital Valuation Tax (CVT) on small plots from July 1.

The Punjab government has decided to collect duties at the new DC rates and the CVT on property transactions after its approval in the 2010-11 budget.

The number of property transactions in the DHA has fallen to less than 30 files per day compared to more than 100 files from July 1, the date the new DC rates and the CVT on five-marla and 10-marla plots were imposed.

The five-marla and 10-marla plots were exempt from the CVT in the 2009-10 budget, the transactions involving one-kanal or bigger plots carried a four per cent CVT.

Property dealers in the DHA told The Express Tribune that with the revised DC rates, property transactions would become too expensive and people would lose interest in them. While the revised rates may look good from revenue point-of-view, they will retard growth, they maintained.

Zahid Shah, a real estate analyst, said that billions of rupees were tied up in the real estate sector. “After the imposition of the 2 per cent CVT on five and 10 marla plots, property transactions across the DHA have declined sharply,” he said. Mujahid Hussain, the Lahore Real Estate chairperson, said that the slow economic activity and poor law and order situation had already affected the real estate business. He apprehended that with the new rates the little or so business activity would also come to a halt. Mian Talat, the DHA Estate Agents Association president, asserted that a rise in DC rates was unjustified and would discourage the potential buyers. “The DC rates have always been less than the market value of plots. But from July 1, they have even crossed the market values in some cases,” he said.

The market value of a one-kanal plot in Park View stands at Rs. 2.2 million and its DC rate has been set at Rs10 million, he added.

“We have filed an appeal with the Revenue Department challenging the DC rates and the CVT on July 2,” he said. He hoped that a favourable decision would be reached in the appeal

An official in the district officers (Revenue) office said that they have received a number of applications to revise the DC rates. They were reviewing the applications and would reach a final decision very soon, he said.

A one-kanal plot in DHA’s Phase V has a market-value of around Rs 6 million. Its DC rate has been increased from Rs2.4 million to Rs2.5 million. The same size plot in Phase VI has a market-value of Rs4 million. Its DC rate has jumped from Rs1.25 million to Rs2 million – by more than 50 per cent.In Phase VII, the minimum market- value of one kanal plots is around Rs2.8 million. The DC rate has soared from Rs1.25 million to Rs1.8 million. A similar sized plot in Park View carries a market value of Rs2.2 million, yet, its DC rate has surged from Rs3.5 million to Rs. 10 million. In Phase 9, a one-kanal plot has a market value of Rs1.54 million and Its DC rate has gone up from Rs1.25 million to Rs1.8 million.

The DC rates for a 10-marla plot in Phase V has gone up from Rs0.8 million to Rs 1.06 million, in Phase VII  from Rs0.6 million to Rs0.8 million,  in Park View from Rs0.85 million to Rs2.5 million.

For 5 marlas plots, the DC rate in Phase V is  0.74 million, in Phase VI is Rs0.4 million and in Phase VII is Rs. 0.63 million.

For commercial plots, market value of a marla across DHA stands at Rs. 1.6 million and its DC rate has been increased from Rs0.5 million to Rs0.7 million.

Published in The Express Tribune, July 14^th, 2010.