Real estate forecast on non-filers heading back to the market!

As you are aware, the real estate market in many cities of Pakistan have mostly been serving the end users, where societies featuring affordable options performed rather well. These societies were also investment hotbeds for some investors looking at small yet quick gains. In the meanwhile, there was absolute silence by investors who would not settle for less than prime projects.

Multiple factors contributed to the situation, where restrictions imposed by the previous government on non-filers for buying property more expensive than PKR 5 million was one. With the decision now reverted, the situation is expected to change. Here is what stakeholders think about it.

A decision made just in time

The real estate developments that previously interested non-resident Pakistanis for investment maintained a low profile during the last couple of years. In the absence of a decent number of active buyers, many of which are essentially non-filers in Pakistan, any market can shatter. The same was witnessed in prime real estate projects of Lahore and Islamabad. And quite interestingly, the rates were kept from crashing down due to strong holding power of the stakeholders.

And it is also true that selling pressure the market had lately started to mount off. The announcement has come really handy, believes Malik Tayyab Pattal of Mahad’s Estate & Developers, who has already started to notice a rise in interest among potential clients from overseas.

Not the same for all cities

Shahbaz Mukhtar of Urban Consultants is of the view that the impact might as well not be witnessed right away in Islamabad as the city is rich in options cheaper than PKR 5 million. Mukhtar believes that availability of these options where an active pool of investors are already busy at, we might not come across seeing some societies making a major comeback. Even if there are some, the demand will remain high for affordable options due to their existing demand among the end users.

Mukhtar also see addition of 5 million affordable housing units as major game change in the country, where the sector will perhaps be actually working in full swing help its target audience; the end users.

The change was inevitable

The low and high tides of real estate investment cycle calls for changes in demand to maintain its circle of life. With current rates lower by at least 15% across some major real estate developments in the country, many buyers have been waiting for the whistle to blow to start reinvesting. According to Imran Shabbir of Richmoor Real Estate, the timing for the announcement seems perfect for investment. And since the options under the current scenario aren’t limited, a far and wide impact on the market is expected to be witnessed.

Shabbir has started to guide his clients accordingly, where he believes that buying property as soon as possible could be a wise move to make. Property sellers, on the other hand, should wait for the market activity to go up.

Clarity on some aspects demanded

For tax-filers who weren’t restricted from buying property under a certain price limit, the confusion on taxation system introduce in the budget 2018-19 remained the main hurdle. The condition set by the previous government where the Federal Board of Revenue could buy back property at rates higher than the property’s declared value had raised reservations among the potential buyers. In addition, confusion also existed on calculation of Capital Gains Tax. In such set up, some buyers and sellers had to sign affidavits for carrying out the transaction and this can happen only when there is an urgent need to buyer or sell property.

For encouraging foreign investment in the real estate sector and hence collecting decent revenue from it in form of taxes, an urgent attendance to these taxes is needed. While the stakeholders don’t actually demand for the taxes to be rolled back, they want the authorities concerned to established clarity. And if increasing investment activity is intended, introduction of flat tax rates can do much better.