New DC rates for societies around Islamabad Airport & their impact

The DC rates have been increased for societies that fall in the jurisdiction of Rawalpindi Development Authority (RDA). This has also resulted in higher DC rates in many housing schemes located around Islamabad International Airport. This has been done to for tax collection purposes.

The notification in this regard was served to individual developers back in October 2018 by the Board of Revenue – Punjab. Many agents operating in the area believe that these notices are the main reason behind the drop in investment activity recorded in these months. Here is an update on the matter.

Why increase the DC rate?

The objective is to increase revenue for the development authority. In this regard, Board of Revenue (BOR) has been active since the last quarter of 2018. Interestingly, the board is looking to introduce DC rates for individual housing schemes according to the category they fall in. Reportedly, a few developers were issued notices last year with DC rates notified at PKR 8 million for 1-kanal residential plots, regardless of their on-ground location.

How did developers react?

A sudden rise of DC rates by 400% was hard to accept. The developers had to register their concerns over this rise and some of them decided to temporarily halt the process of property transfer until the matter gets resolved via mutual agreement.

Before the BOR issued the notification with increased DC rates back in October last year, the old DC rate per kanal was PKR 2 million. In addition to that, many of these housing societies around the new airport had also announced possession in the last couple of years. This essentially meant that many of these societies had plots instead of files, with certain taxes to be imposed.

With DC rates increased, the taxes to be collected in terms of Stamp Duty (at 5%) and Withholding Tax (at 2% for filers and 4% for non-filers) made property deals much more expensive for short-term investors.

The outcome

Reportedly, the DC rates notified towards the end of 2018 were much higher than the market rate of plots enjoying prime locations. While a few societies decided not to allow property transfer in protest, others awaiting the BOR notification for increased DC rates continued their regular operations. This, however, couldn’t prevent the negative impact on the market.

The investors also had reservations against paying taxes on much higher DC rates than before. Consequently, the market demand dropped and brought along a major fall in number of property transactions. In turn, the market value of property across all major societies around the new airport also dropped.

What’s the latest?

By negotiating with BOR, some societies have managed to bring the DC rate downs while others await their notices. Agents have confirmed that the new DC rates for TopCity-1 have been finalised. In this regard, the developer has also issued a notification. The new DC rates for TopCity-1 are as follows:

1-kanal residential plot = PKR 6,653,000

10-marla residential plot = PKR 3,326,500

5-marla residential plot =  PKR 1,849,534

Commercial plot per marla = PKR 920,000

In the meanwhile, new DC rates for several others are awaited. It is expected that BOR will share an official notice for Mumtaz City on Friday. With the board looking to set up different DC rates for these housing schemes around the airport, we should expect the rates to be set according to the society’s size and existing market price. This could also bring forth new societies with better investment prospects. We are looking forward to seeing how the market is affected by these changes, so stay tuned to Zameen Blog.