What will be the impact of recent budget on real estate?
Zarkoon Bhai,
Here is the complete detail i have written on a post & my some other accounts:
Investors, Dealers & Realtors think that budget have no impact on real estate. But Im having different view as usual. Here is the list of facts i consider.
1. No new taxes on real estate sector as were imposed in 2019-20.
2. Reduction in DC rates on many areas in different cities will reduce the tax amount.
3. Continuation of low cost loans for housing policy.
4. Real estate in pakistan heavily depend on remittances. I expect increase in remittances for atleast next 2 years.
5. Continuation in new development projects such as RRR realignment. MA completion. Malir expressway, lahore ring road southern loop 3 & 4 etc.
6. Govt is willing to remove WHT tax regime upto 40%. Any ammendment afterwords, in application of section 236C (WHT purchase of property)& 236K (WHT on sale of property) Will give real estate sector a boom.
7. Incentives from DHA bahawalpur & multan for development charges waiveroff till december 2021.
8. Possiblity of amnesty extension, although probability is 50% only but they will try to gve further stmulus to constuction industry.
9. Govt decision to start new housing projects under PHA.
10. Oversease pakistanis income increase due to rupee devaluation as compared to 2018.
11. Interest rate is still at 7% & real interest rate is negative as per precidence and seems to remain single digit as govt wants to go towards growth, instead of financial tightening once again. So peope will avoid bank deposits. This cash will go in real estate or stock exchange.
12. Govt is going to abandone National defence savings, 25,000 & 7500 denomination prize bonds, to start documentation of new name registed prize bonds on FATF pressure. This will casue almost 11 billion rupees to flow towards realestate or stock market.
13. All of above factors are increasing demand for real estate, but the supply of realestate investment options is limited. Means most of the genuine societies are more than 5 years of age. No new Dha no new bahria no new CHSs.
14. Govt is going to regularize majority of housing societies that are developed but not granted any NOC yet.
15. Lack of investment knowledge in nation collectively in stock exchange. So the real estate is our national investent avenue.
16. Lack of knowledge of investment in physical bullion gold. hence people buy gold from jewelers that is not much profitable.
17. Restrictions in purchasing of foreign currency, hence creating a hurdle in investing in foreign currency.
18. Many individual events are also important in real estate sector e.g. DHA lahore announcing posession phase 8 & 9. DHA gujranwala ballot is due in 2021. DHA quetta announcing commercial Plots. Bahria town can launch new blocks in BTK BTR & BTL. Bahria peshawar is in a phase to hire & train the employees.
In short, directly or indirectly, budget 2021-22 has many positive impacts on real estate sector.
I hope all these factors will keep on moving the train forward for next few years.
Regards,
Humayyun.
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In addition to what Humayun said,
All of the factors that government could have given in favour of real estate already exist. As for Amnesty extension, it is crystal clear that it will be extended and I have no doubt about it. I say this because Shaukat Tarin already explained in his post budget interviews that amnesty will be extended till 31st december. Economic Advisory Council as well as Chamber of Commerce have confirmed this (dawn, brecorder and urdupoint reported). It is only a matter of official announcement which will be done at the end of the month.
The only significant change I see this year for real estate is that large denominations of prize bonds are being discontinued due to FATF money laundering laws. What this means is an incredible amount of money is and will flow into real estate for next few months. Coupled with amnesty extension, this will keep the market bullish and further price gains will be made.
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Agreed to Asad sb
Very much likely to happen..
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@Humayyun and Asad,
I had analyzed on the other thread that govt is under extreme pressure to increase revenue. If they've to remain in IMF program, then new taxes have to be slapped.
On the other hand, govt has to save face amid sky-rocketing inflation and diminishing jobs. Recent by-election result shows the sad demise of this heavily invested project.
So, in order to save face and to get the finance bill passed, they've made a "toothless" budget. But in reality, new taxes and levi shall be slapped soon in mini budgets, and real estate will be no exception. Amnesty extension is subject to IMF approval.
Here's Tribune leaks on much-touted "no tax on salary".
https://tribune.com.pk/story/2305106/govt-proposes-to-slap-rs10b-taxes-on-salaried-class
Frankly speaking, I would have agreed with you a few months ago because Pak government approach to IMF was poor. They were willing to do anything IMF was saying.
Now Imran Khan and with appointment of Shaukat Tarin, PTI have backtracked on that approach. Shaukat Tarin so far seems very sensible and I do believe he’ll hit those tax collection targets as he is introducing sturdy implementation of FBR taxation. If his plan works out well, it would be enough to meet IMF targets. Imran Khan and Tarin have given IMF a lot of pushback.
Also note, tax amnesty for real estate exists till 31st december (no matter what), it is only the black money clause which is finishing on 31st June and although that is important, I know it will get approved because it’ll help Pak government collect more taxes and get more people in the tax net. Also, PTI decided not to implement greater taxes where they should have for example cigarettes and sugar… major commodities they could have generated revenue from and had a health stance to support but they didn’t (instead imposed taxes on e-cigarette to support big tobacco). Which hints to me they are solely focussing on expanding tax net and black money amnesty will certainly help that.
Trust me 100%, amnesty is virtually extended. Only a matter of official announcement because as I mentioned Tarin said it on live television while Chamber of Commerce and Economic Advisory Council confirmed it. And the logic behind it makes sense as well so why not.
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Some people have also been asking well doesn’t extending black money clause of amnesty conflict with FATF regulations? FATF regulations to get off blacklist are very specific, they want certain targets to be met for example X amount of people money laundering to be caught through regulations. Government is intending to meet those targets by discontinuing prize bonds and they will hope to catch terror-related money launderers through that. Which is why the deadline was previously June 30 but after FATF meeting, they extended it to 30th September (in time for October FATF meeting).
Apparently, there is some confusion over CGT on immovable property that is causing controversy. Does anyone understand what the new finance bill has proposed and what does it translate to, in simple terms?
See this Dawn leaks for example.
سر جی پرانا مشروب نئی بوتل میں۔۔
ندیم بھائ۔۔
۔
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G app theek kha rha ho sir
Ertugrul Season 3, Episode 1:
Petrol prices increased today.
ISloo1 Brother,
I agree with you govt is under extreme pressure to increase revenues, But i am also of opinion that Tax Net should be increase instead of imposing further taxes on taxpayers.
They are willing to Bring retail & wholesale sector in tax net with the support of technology. & also going to send notices to tax evaders.
The main source from where they will increase their revenue as per my thinking is they want to promote growth, Which brings consumption as well, each consumption increases the amount of indirect tax collection. So lets see if there is also plans of privatization revenues or not bcoz they are saying to collect around 2 trillion rupees from non tax income head. this includes other govt fee/ charges/ Privatization And so on.
at the time being, i feel Govt is not adopting a single growth policy but a hybrid policy i.e. Mix of Export promotion, Import substitution & Consumption growth model.
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ISloo1 brother,
And for flat 5% CGT on immoveable property of worth 5 Mn or above, Its very easy to avoid it buy dividing your investment. Instead of buying single plot of 10 Mn, The strategy should be to buy 3 little plots. I think if not repealed, This will bring investors to move towards little plots & their demand will get further increased.
Indeed, economic growth will be integral to higher tax collection. In fact, Pak government is making more money than ever right now from real estate taxes/
For some odd reason, “Devaluation of Pakistani currency” thread is blocked, so can not post there.
Just to inform that despite my earlier hunch of rupee stability this week, it continues downward slide. Now touching 157.