Property taxes: CDA jacks up ground rents

Dues for many properties were previously not collected, improperly calculated.

ISLAMABAD:

The Capital Development Authority has moved to increase its tax generation capacity by imposing significantly enhanced annual ground rent on a few new commercial properties under the head “new land uses”.

The newly applied rates are subject to a 15 per cent increase after every three years, according to a memorandum issued by the finance wing of the authority.

Ground rent of commercial land is a payment made by the owners of leasehold properties to the CDA every year. It is generally fixed for long-lease commercial properties, which are usually leased for 99 years, at the time of the agreement.

The new rates include Rs10 per square yard per annum for class-III shopping malls in model villages, Rs7 and Rs10 per square yard for amenity plots in model villages and sector areas respectively, Rs25 for luxury flats and Rs10 economy and government flats, Rs16 and Rs12 per square yard for hotels and motels, and Rs35 for Blue Area plots.

“Earlier, these properties were not charged annual ground rent,” said CDA Finance Deputy Director General Ziaur Rehman.

He said the CDA had not calculated an estimate for the annual income they expect from the new head.

The authority can generate reasonable revenue by collecting annual ground rent from leased-out commercial properties across Islamabad. But the inefficient tax collection system at the CDA has left the civic agency unable to maintain consistency in revenue generation from the collection of annual ground rent.

“It varies from year-to-year,” Rehman replied when asked about the revenue generated from ground rent collection. He blamed the variance on leaseholders failing to fulfill their responsibility by voluntarily submitting outstanding rent every year.

He said in 1960, at the time of establishment of Islamabad and the CDA, the annual ground rent was Rs0.25 for commercial properties, but now it reached to around Rs8 to Rs10.

He said the CDA forcibly recovers taxes from the owners of commercial properties, in some cases, after 10 to 12 years. “When the owners come to sell their properties, they are asked to submit outstanding annual ground rent plus fines on the outstanding amount,” Rehman said.

However, a senior finance wing official blamed the problem on the failure to digitise land records at the CDA. “It’s the responsibility of the CDA to intimate the owners in timely fashion by sending notices about the deadlines for submission of annual ground rent, but because of the manual land record system at the CDA, city managers remain unaware about payables of land owners,” he added.

He said figures collected some three years ago show that the authority could generate up to Rs1.5 billion per annum if annual ground rent was collected in a timely manner.

Published in The Express Tribune, May 14^th, 2014.