The recent standstill seen in the market in terms of property sale and purchase activity followed by protests held by property agents throughout the country lead to a formal meeting between Special Assistant to Prime Minister on Revenue Haroon Akhtar Khan, Federal Board of Revenue (FBR) senior officials and representatives of Federation of Pakistan Chambers of Commerce and Industries and property dealers association held a couple of days ago. The meeting turned out to be successful, and the government has taken back its decision to valuate property through State Bank of Pakistan’s appointed valuators. Congratulations readers!
With regard to how the offices concerned will now valuate the property and reduce the stark difference between Deputy Commissioner (DC) Rate and real time market value, several theories are circulating the market. Please note that the final decision is yet to be taken and a meeting will be held in this regard between Finance Minister Ishaq Dar and FBR officials. Before details of this meeting are shared with the media through a press conference, nothing can be said with certainty about how the process will actually take place.
On the other hand, the details of the meeting held between Haroon Akhtar and the representatives of real estate associations are being circulated widely through WhatsApp and related mediums. I have also come across a few voice messages and also spoke to the Hayatabad Dealers Association President Mazhar Wakeel Durrani, who was also present. The meeting had a 4-point-agenda to discuss. According to Durrani, Khan and FBR officials graciously agreed to discard the appointment of SBP valuators to determine the fair market value of the property. Instead, they put forward a proposal to increase the current DC rate by 40% this year and continue increasing gradually over a period of 5 or more years until this difference is removed.
According to a news report published in Dawn today, the FBR is considering a specific formula to set a reasonable mechanism to evaluate fair market value of property throughout the country. Per this report, a mutual consensus was developed between the government officials and stakeholders from the real estate and trade industry on the proposed formula. This formula suggests that 50% of the difference between the DC rate and the real time market rate of the property be added to the old DC rate, to get the new DC rate, and this will be considered the fair market of property during the next two to four years. If I understand correctly, the remaining difference will still be removed in the future, if not right away.
Another amendment in the Finance Act 2016 that bothers real estate agents is the proposal of taxing property transactions done in the last five years by filers and 10 years by non-filers and the imposition of an equal amount of penalty. The agents want the government to give one-time amnesty in this regard and leave the old transactions be.
Furthermore, in case of Capital Gain Tax, they have specifically asked Khan and FBR officials to not increase the 2 year condition to 5 years. In terms of increased tax ratio for the filers and non-filers, the agents also want a similar amnesty. To be clear, the stakeholders have no reservations about penalizing the non-filers, they simply don’t want this penalty to call for a similar rise in tax applicable on the filers.
So this is some of the information that might help you get an idea about what actually happened in the meeting and what the possible outcomes could be. What do you think is ultimately going to happen? Let me know through your comments below.
Related News
Will the prices will increase or fall ?
If government stick on the announced tax scheme – undoubtedly the price will go down to the each of middle category and a lot of middle category people will start thinking to buy a piece of land and start constructing their own house. But if government compromise and back from the announced taxes then the current theft and robbery in the real estate will continue and few hundreds individuals will benefit in the real estate sector / business.
Government should do what is beneficial for the maturity of the people and should not care of few profit makers. Good Luck to the government
I am honestly aghast that you would ‘Congratulate’ people on the fact that the government has bowed to the demands of the black money lobby. I asked a few days ago what your editorial position was on the issue of black money dominating and driving the market. That question has been answered loud and clear.
@arif government has not bowed down to the mafia demands. It is even better to have a fix table for property prices. This will eliminate any possiblity of influence and corruption. The main aim of the government is to the evaluate property prices at actual market value. This is automatically flush out all black money. The property prices already under pressure and will come down further in coming days.
Correct.
Government should act and apply what has been announced. This is only way Government can help the middle and poor class people. In current only few hundred people are the beneficial in the real estate who are doing making money just inter-changing the documents and fooling the seller and buyers.
No doubt goernment is under pressure from the current beneficiaries whose monoploy will end up if the new rules are implemented. This is an examination of the PML-N government. I hope government will do what is better for the majority of the people.
Lol what difference will it make if they turned it to white money ! People pay taxes so they can have some services from government side but here all public money gets looTed! All this government is doing to cash as much as possible cz IMF will soon declare this country a bankruptcy
Hayat Sahib – I am expecting good results if government apply the tax rules on the real estate sector as per their set up rules regulation. So give them a chance
This is a VERY important topic Samra. Please keep us updated about it. Most of us do not understand the depth of this issue and the impact it is going to have on the overall business of Real Estate as a whole.
http:// www. dawn. com/news/1272370/realty-stakeholders-fbr-to-prepare-new-valuation-formula-for-18-cities
Happy to note that at least the ridiculous notion of an across-the-board percentage increase has been rejected by FBR. DC value of DHA Karachi Phase 8 500 yard plot is about 16 lakh. Actual price currently is over Rs. 6 crore. A 40% increase (as proposed by the black-money mafia) would have achieved nothing. Hopefully, the final price agreed will be closer to market and have at least some impact on the amount of black money flooding the sector.
The measure to regularise prices of previous purchases by a one-time payment of 5% is also a good initiative, and acknowledges the reality that this mechanism only existed with the knowledge/consent of the government, and saves investors/owners from excessive and unfair CGT.
One thing that the events will hopefully lead to is FBR getting more involved with the property market and using this data to ask more questions of buyers/sellers about the source of funds. If this starts to happen, that will be the biggest deterrent of all.
If government sincerely apply this rules asking the buyer for the sources of money, I am sure all thieves from the real estate sector will disappear for ever. Then there will a chance for the fair and real buying / selling int he market for the middle class people.
Govt. bowed to the black money and real agent mafia. Shows the dominance of patwari system. Losers are genuine buyers.
Congrats!!
Government has not bowed down to mafias! New tax of 10% on capital gain. Property being evaluated at actual market value all still there. Its better that there will be new fixed table for actual property prices. Even past transactions will be taxed (unprecedented move)
To stop black money or to catch them simply track their source of income, question them and let them proved.
Agreed. This is the initial step forward to regularize the real estate market. PTI and PPP should stage DHARNA in favor this rule and get the sympathy of majority of the people. Lets see what they do.
I propose DC rate should be 60-70 % of the market price.
Regards,
Basit Akram
Why should it not be the actual market value? Why should people be allowed to hide their black money?
Then forget to have middle class to enter in the real estate business
so this means that government wants to get more taxes from the property sector..this will decrease the prices of property as investors will prefer investing in other sectors.
Well, this is a good to hear that Government seems flexable, but the main issue comes towards CGT as they are reluctant to negotiate on it.
The unity of dealers and investors is badly effecting the Middle and Salaried class. They are responsible for exorbitant rise in property prices hence making impossible for a common man to save and built a house. Government should strictly regulate the property sector and should also announce cheap long term mortgage financing for helping the middle/Salaried class.