Budget 2019 & real-state future?

Buying Property Where to Buy
#1

There are new measures announced in Budget 2019 by the govt to increase its revenue collection like,

1-increase in immovable properties’ rates of federal board of revenue (fbr) by taking it closer to about 85% of actual market value.

2-persons purchasing immovable property of value greater than rupees 5 million in the case of immovable property will be required to purchase through a cheque.

3- income from capital gains on open plots will be taxed at 100% where the open plot is sold within ten years.

My question is that such measures will cause a big correction in the real state prices.

A- Can someone shed light on the possible correction percentage in the prices of plots?

B- which type of plots or schemes(e.G dha,bahria etc) will be less effected?

#2

Theoritically, hard to predict and just perceptions unless some time given. Some of the external factors (of Real Estate) but critical part of economy are:

- Rising inflation that eats up saving and reduces buying/saving power of locals working and residing in PAK

- Rising USD (and pegged) currencies make foreign investment saving more profitable then effort-driven real estate investment for overseas.

No expert real estate representative to guide the government. Rising inflation will affect the locals and Rising USD will impact overseas, unless these 2 rise are bound, real estate investment will remain slow!

Rest is too technical and to be seen only once it's put into places and it starts to have it's impacts.

#3

Imtiaz,

You know it is all bad news for property, otherwise all these dealers and investors would be jumping with joy through the roofs of their places.

BTW, 1/2 of this government is full of property investors including Imran Khan so can't imagine how there is no one representing real estate mafia.

More like everyone representing real estate mafia one way or another.

#4

Zarkon,

As per Hammad Azhar, prices will go further down after this because quick-flipping has been discouraged through new proposal. They are trying to lower property prices to jump start construction business which is suffering badly and not creating any jobs.

Cement prices fell down to 400 as supply mounts more than demand.


Now it's a market in the hands of genuine buyers and only long-term investors.

Exiting your investments out of property has been made harder so those who want to sale in near future and want to exit out will suffer more.



BTW, check your point#3 CGT is not 100%. As per my calculations it is around 30% which equals to any other income source of that level.


Also sellers still have till July 1 to sell out on old CGT.

#5

Respected seniors!

What you see that prices correction in CDA sectors (I-series / G-13) will also happen ?

or

it will be only in private societies like Faisal town ?

#6

@JDM

Sir, as per the document below link @page no 21 section no 6. The Capital Gain tax is 100% for the first year and beyond that till 10 years its 75%.

https://www2.deloitte.com/content/dam/Deloitte/pk/Documents/tax/Budget%202019-20-Highlights&Comments-deloittepk-noexp.pdf

#7

Zarkon,

I might be wrong but as per my understanding; 100% of your net gains will be taxable at the rate of your regular income tax rate slab.


Let's say if you make 100,000 profit (net gains). You will show full amount in your income tax returns and 100% of this amount will be subjected to income tax. You will get zero exemption on this income. So if your income tax slab is 30%, you will pay 30,000 out of that 100,000.

On 10th year you will show 100% of your gains but only 75% will be subject to income tax and 25% will fall under the exemption.

Will discuss further with my sources and try to find some answers after the 1st.

#8

All is well . Minor to no affect

#9

The rate will be calculated on gain minus rate of inflation.if you gained 1 lac you will pay15% of 75th of gain.2,250 will be your CGT.

#10

Ok now onward the purchase of property is allowed only through Bank Cheque, means there will be a trial as at what price it was purchased and sold to figure out the Gain to be taxed.

My question is the properties purchased during last few years and are selling now , how they will determine as what profit one is making, will it be on the property price difference between the old and new property valuation table.

#11

Yes,

Total sales amount - cost of actual acquisition = Total gains (Taxable as per the law)

You can't really hide behind showing lower sale amount than actual. For those who lied or hidden previously should best to declare it before June 30th and give your money a legal cover of amnesty.

State everything on actual market value from here on forward.

Later if you feel that taxes are high or unjustified, feel free to organize, lobby and protest against government to lower the tax rates.

#12

Senate Standing Committee for Revenue

پراپرٹی کی خرید و فروخت پر ٹیکسوں میں اضافے کی تجویز مسترد

https://jang.com.pk/news/650734-senate-standing-committee-for-revenue-rejects-proposal-to-increase-taxes-on-property-sale-and-purchase

#13

....
Constitutionally, finance bill doesn't require senate committee's approval. Simple majority in National Assembly will get it passed. It's all for the show. We have seen that happening during PMLN tenure as well.

#14

Thanks JDM,

"Total sales amount - cost of actual acquisition = Total gains (Taxable as per the law)"

But my question was in above formula, how they will determine the Cost of Actual Acquisition for properties purchased before this bill in past. will this be as per the difference between FBR old and new property valuation table.

#15

...

Each individual will have different scenario as to how they previously dealt with such asset at the time of acquisition.



If you have even slightest bit of doubt or discrepancy in previous filings, or may be you are one of those who never reported acquisition cost at all, you should just take legal cover of Amnesty.

Take an example of Imran Khan's apartment in London which was declared but he still took amnesty cover back in those days. Now even if they ever find a dependency regarding that apartment they can't do anything to him because of his amnesty cover.


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