As announced in today’s newspapers, a major amendment has been made in the Income Tax Ordinance of 2001 through the Finance Act 2016. Property will now be evaluated according to a new mechanism introduced by the State Bank of Pakistan (SBP).
The Deputy-Commissioner (DC) Rate will not remain valid from July 1, 2016 and the SBP will appoint one or more valuers to determine the real-time value of property. According to the Finance Act 2016, everyone who invests in property from July 1 onwards will have their property evaluated through the valuers of SBP. Furthermore, it is worth noting here that these valuers will be referred to the SBP by Federal Board of Revenue’s Commissioner of Inland Revenue department.
All other taxes that the real estate industry has been burdened with will also be applicable from July 1.
In order to avoid these newly proposed taxes, the percentages of which are different for tax filers and non-filers, property sellers wish to execute their transactions before July 1, which is why the market is seeing quite a buzz these days.
Unlike how it usually happens, real estate market is currently fraught with property sellers, only a few days before Eid-Al-Fitr. And the situation is almost the same in all major cities of Pakistan. Looks like the market may see correction a lot sooner than expected. Apparently, property buyers this time can wait until the rates come down and the situation does not seem to be pushing them to make the purchase.
It is believed that these amendments will bring black money in the tax net. In order to discourage tax evasion, the evader will be bound to pay double the payable tax amount as penalty and additional tax. Depending on circumstances, the tax evader can also face prosecution and 2-year jail term.
The experts who proposed the new property evaluation mechanism believe that the latest amendment will curb tax evasion of billions done in the form of property purchase. They also believe that the move will encourage investment in other sectors, the country’s GDP will grow and several new job opportunities will be created.
All of this appears to be a scene from some fairytale; a world where entire system could be fixed with the wave of a magic wand. I wish it was that easy.
What’s your take on this amendment? Share your thoughts with me in the comment section below.
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It looks like TAX system of number-1 country, while facilities (Police, Hospitals, Govt facilities, etc) of a poor country.
Samra said rightly that it seems like we are in Fairy-tale (dreams land).
Also we can say FBR and SBP made a strong TAX in-take system, which has a lot of leakages in the form of our corrupt Politicians, Businessmen and Bureaucrats.
Believe me, systems having injustice will never flourish.
It appears to me that Patwari Nizam is making a subtle, disguised entry.
Volume of buying and selling will decrease. If increased Capital gain tax is also factored in , then real estate has been given a shock. Genuine buyers will also not benefit.
So far, i think the same.
almost 80% of my clients(im a software developer) discuss with me at some point where to invest in property seems like every industry in investing in property and its a bubble. how else can u explain a 5 marls plot almost 20km away from a city in a society where 80% land is uninhabited going for 40lakh rs
Not at all,this condition is very temperary.becuse every things will change there value and condition with the time and stock markets also.
i am a brooker,.serius buyers can contect me regulerly
i guess Genuine buyer will be in better position to buy with that new law in the current situation it is almost impossible for middle class to buy something for building home.
I suspect that after today’s ordinance regarding property transactions priceces of plots and houses might come down. Investors will be disinterested to invest any money in plots and property.
new rule and taxes in property inviting slump after july 1st.
DC rate direct current in west or deputy commissionaire rate in Pakistan not valid from july 1st . SBP valuer now will evaluate property individually instead of general and put taxes accordingly, ,already heavy taxes for fillers and non filler implemented , very sad , this corrupted setup now major partner in everything you earn without providing anything good in anyone life , gate for slump now opened , who will stop property crises now ?? instead of implementing agriculture tax and amendment in law , instead of developing univ and hospital in rural areas instead of banning construction of c class societies on agriculture land , and stopping people moving to cities , instead of saving agriculture land for agriculture these short cut lovers corrupted , dishonest,sluggish money launderers , feudal lords have come up with more short cut ways to target hard working people . very sad indeed .
Mjy to smjh nahe aa rahe jang newspaper mein likha hai is se log property se paisa nkal kr industry pe lgain ge or gdp increase ho ga , energy crises khtm yeh govt nahe kr ski , battein check kro .IMF krwa rha hai or 20 sal tk next jan nahe chory ga pakistan ki or hardworking people ko he apni aesi taesi pher kr qarz utarna pry ga lgta . We demand if they want to implement these taxes bring corrupt leaders to court and get their corrupted money back ,no more loans from imf cut off certain budget then we will pay .
Agree
100% Correct. Already these money launderers cut Rs.25 on Rs100 mobile card. 0.06% on 1 lac transaction. Multi times( manifold) Sale Tax, which is paid by consumers.
What about billions of dollars these thieves politicians have shifted out of country? Is there any Ordinance for black sheep?
When the corrupt rulers started playing their last innings they made such blunders
biggest question is why we will pay so heavy taxes to corrupt govt? , who gonna trust them that this money from taxes will be fruitful . instead actually these money will go to IMF … no more harsh taxes on middle class..
This is a move in the right direction as estimated about 3000 billion rupees are parked in property market. most of this money is from graft and theft. The genuine buyers have been suffering owing to the involvement of the non genuine buyers who are just hiding their money. So now is the time to smoke them out and bring them into tax net and force them to invest money in some productive sectors where they generate some real employment. The present game of property investment is just safe heaven for tax evaders and looters. Its time to pay back guys.
what miracles this govt. has done so far that we could expect some good from them. How many industries have been established in the country during their regime. They are looters and plunders and cannot do any good to the country. Correct, the money should be invested in industry and not in real estate, which could boost the economy, but the trend should be set by the govt. by itself and not by force getting the money out of one sector and getting it in in another sector. Rubbish and unmanageable task for this corrupt and stupid Govt.
Just wake up you are living in the dream land
the same guys who pay heavy nills to k-electric despite such load sheeding and speed meters
As usual a bunch of unqualified officials trying to change something in a stupid way but in real they are providing opportunity to greedy government employees to loot ppl money for each single signature/approval.
genuine buyers will have nothing to fear. but whats the use of having property schemes with black money. Whole Bahria and DHA are lying vacant but prices are touching the sky. Because the people with ill gotten money can afford to wait and wait till a new one from black market enters and buys the property at some artificial rate which have hardly any relevance to reality. I appreciate this move of the governmnt
Will this evaluation be applied on transfer of non-developed/off ground property as well?If yes then this will bring the entire market back to the actual rate as were 2-3 years back.
Only on ground property will be evaluated per this amendment, files will remain exempted.
the prices should be real not the play ground of money grafters who raise the price of whichever they like to. I think this move will benefit the real buyers who want to build a place of their own and are tired to paying rent to these grafters. a common man can hardly afford to build house with such prices of property
Paying tax is not bad as many developed countries in the world taking almost 25% or more of income of citizens in terms of tax but they attract people not forced.
secondly they spends tax amount for welfare of citizens but in Pakistan its opposite our tax money enhance our ministers personal businesses.
I wish one day Allah will be kind enough on us by appointing a team who will not spare a single haram khor.
Hahaha… Khuda nay aaj tak use koum ki halat nahi badli.. na ho jisay khiyal aap apni halat kay badalnay ka…
I dont know why general public and people are not gathering together and start killing all the feudal lords and politicians then bring the best (honest) person amongst them… But they can’t… Actually problem is that everyone is corrupt and it starts from prime minister till a hawker selling goods on the road…
I have an observation in our society…
Jis ka jahan bas chalta hai wahan woh apni maximum koshish karta hai benefit lenay ki aur kahta hai logon say kay ji Allah ka bara karam hai…
Aur jis ka koi bas nai chalta aur kuch hath nai ata woh logon say kahta hai kay ji main tou shareef hon… Aagar yaqeen na aye tou 100 RS note test will show you the reality of our society… siif aik galli main jaltay jaltay 100 RS ka note kisi kay samnay phaink kay deakhain kay koun aap ko return karta hai…
Please correct me if I am wrong, Samra; after July 1, the buyers will engage the approved valuers at their own costs. Is that right?
I am not sure about the sellers; will they pay the CGT, if selling within 5 years, on the difference between the DC rate and the buyer’s valuer’s rate?
There is indeed confusion, but the main thing is that good days are history for tax evaders and non filers.
Did we pay DC some fee for property evaluation before July 1? If not, we shouldn’t pay the valuers any money. Most of all, as the new evaluation setup is levy higher tax on property, the Government should bare the cost of it.
Yes, a certain percentage of CGT will be paid if property is sold within five years of purchase per the new market rate as determined by the SBP valuers, that’s what i understood from it.
Yes, good days are over for tax evaders as we finally have achieved “complete transparency” in all other departments.
appreciate and agree.
Thanks Samra, do you perhaps have more details or link indicating what exactly will be implemented? It would be best to quantify this negative sentiment for gauging the potential impact thereof.
You can check complete details online in newspapers of Jun 29
NEW PAPER NAME PLEASE
get help from google, it is there for that very purpose.
Thanks for the nice post Samra. I specially liked your second last sentence “All of this appears to be a scene from some fairytale; a world where entire system is changed using of a magic wand. I wish it was that easy.”
Without going into details here following can happen:
* Such huge change of property tax system overnight indicates sheer stupidity n immaturity of the Governing Bodies
* Corruption in property taxes will reach unprecendted levels (just like during campaign against fake drugs)
* Government will remain unsuccessful in increasing tax revenues considerably. Effects of such drastic measures could be very much opposite.
* Just like when foreign reserves were freezed – invester interest specially genuine investers will be seriously impacted
* Real black sheeps will transfer huge investments to tax free places like Dubai
* Lots of regular ppl will suffer
I’m willing to discuss the points in detail if necessary.
Real estate market will not remain the same, that’s what i am sure of.
I am also confident that people here will find means to breach the system as this is the same old system, governed by the same old people.
so its not the policy to believe rather the people. So lets move ahead and beat the **** out of looters who have parked their money to create a property bubble
As the history of this government is in front of us they always introduce policies which support their family and fellows and rest will be burn.
In k pass koi qualified banday hi nahi hain jo workable policy banain Pakistani awam k liye. Chor bazari lagi hoi, jis department main jao woh rishwat mangte.
Is it real?
🙂
Good move indeed, might help to bring down skyrocketing property prices and pave way for investments in other sectors and industries.
Real buyer and lower class would definitely benefit from this.
And yet, everyone will be paying a bag full of money in form of tax and will get not solid services in return.
great move, outwitted the grafters. cheers. see this unwise property expansion and ballooning for no real reason. I just fret when i see thousands of arable land being consumed by these property gators whose greed has no limmits. Thats a move that would benefit the real buyers and middle calss who have been kept away from a house of their own and paying rent to these gators for years.
cheers Ishaq Dar and Team
We are desi people and we have desi approach to solve all our issues. Similar scenario is seen in Govt. approach also to raise funds either hook or crook no matter what medium is correct approach. We don’t see the effects of thoughts, actions on short and long term on welfare of the public and Govt. itself.
We just want to make it happen because our foreign lords. IMF, World bank will not be happy with us if we don’t take such actions.
Similar scenario created by Govt last year when WHT on filer and non filers was launched which resulted major withdrawl of money from banks by people. Then later Govt gave amnesty to all those people and tax relaxation but no one accepted their new deal and later proved as failed.
Our country people really need to think.
so what will be the basis for evaluation use by valuers of SBP FOR the properties ?
I am also awaiting details to learn the new criteria for property evaluation.
nice work , keep sharing latest info
Money
This is all it would take for the evaluation
I’m just wondering if this money could possibly stay in Pakistan
This money should better fly out of Pakistan which have created an artificial price hike without paying tax
i think valueation is not a problem, the problem would be the unearthing of black money and grafts of government servants, businessmen, faujis and people like Malik Riaz. wait and see this bubble bursting now
Quality article. wish you had shared list and rates of combined taxes on property transfers which will uplift this article to a reference tool level as well.
Yes, i have planned to do so, just waiting for things to get clear about the final percentages and all.
how this evaluation process will effect for the properties in housing societies like Bahria Town and DHA etc?
It should ideally be the same for all projects and cities.
So this mean if i have any property i should sale it soon.
You are late, the new rule has implemented from today onwards.
So properties which r in the way of ring road should be given market rate not dc rate. They can go to court against govt after these tax reforms.
Yes, that could be one of the few good aspects of this new evaluation mechanism and also a test case to prove how effectively and transparently they can execute it.
I think its better to bring black money in tax brackets otherwise these people will ruin the real estate sector and ordinary person will never affrd to buy a plot or house. However, tax rates are higher. For 5 marla should be less tax and for commercial and kanal should be more.
You are right in way but the new tax policy doesn’t help the genuine buyer in anyway.
@samra, It doesn’t, but one thing could be considered if the market correction brings the rates much lower, then yes it would benefit genuine buyer even if the tax is imposed, considering paying tax to govt. and expecting facilities and services as a separate thing. What say?
What would be the case of non-leased/desi lease/china cutting properties then, how would valuators view it?
i am with you
An honest govt, honest and respected ministers, honest policies and country is progressing leaps n bounds. Very soon we will be USA of Asia. Nice dreams. Sote raho bhai
As an overseas Pakistani, seeing this law coming, I’ve already gotten rid of some of my investment in property during the past few months on whatever good rates I could get, and transferred money abroad to more stable investments. I’ll be getting rid of my remaining assets in the coming months because I think investment in property will become toxic over next year or so. Moreover, I’m in no mood to grease the palms of SBP, and FBR officials, who have no stake in the game, but are just in for their cut. Just too much hassle.
bro. You were not living in your property rather helping to expand this artificial ballon. So you taken yur money no regrets as this money was not doing any thing real for common man rather the investors changing hands without any real good. but this move will definitely save some agar i lands
Zahid sb, I appreciate your point of view that property bubble should not be created. However, has the government provided any alternative to people to invest where returns can beat inflation? Load shedding, law and order, corruption, inflation, all are going upwards. Also what benefits will this new law bring to so called real buyers, who are not investors? Tax will hit them too. They too will have to bow down in front of FBR and SBP corruption who will slap them with an arbitrary price tag. Only poor man will be put in jail for 2 years, a..k.a genuine buyer who already are hand to. mouth. Bribe the official, or your property will be worth the piece of paper it’s written on. There were lots of people who were doing property dealing as side business to supplement their income. What will happen to them now when the sale purchase dries up? As for agriculture land, it again shows government departments not doing their job when approving societies, and are willing to do anything for bribe.
On the other hand quality of development projects will go down, so will genuine buyers want to build a house where there is no water, electricity or sewerage? The only outcome of this rule will be more corruption, and money filling the pockets of another mafia. First the government should increase the buying power of average consumer, provide more jobs, and create more economic activity, instead of policing the property sector. Everywhere else in the world, such laws are first discussed in parliament for years before being approved. I think this just a quick fix by the government to please certain people and close relatives.
Zahid bhai,
As long as it is concern of black money guys its fine department has to focus on them. Do u believe those guys will be under law? bad guys are ministers and government officials front men. nothing will happen only u & me will be in trouble. if they r this much sincere about black money why they dont explain the money they loot and invest off shore as on panama leaks issue still no proper reply by our PM family??
Dear Bilal,
same here and agree with you. SBP & FBR they will collect millions as a golden opportunity provided by corrupt leaders to these departments. These leaders r not sharing the source of money disclose in panama leaks so far what u expect from them??
Will all properties which are purchased or sold be assessed before 1st july 2016.
If yes what will be its criteria n how they assesed .
Will real estate business will be down. More the plots selling ratio will decrease or not .
The ppl who has invested what they have to do . Wait or not.
Will this rule be challnged on that property which is sold or purchased before 1st july 2016.
What real estate tycon thinking.
No, read for details:
http://www.zameen.com/blog/property-evaluation-mechanism-applicable-on-transactions-done-from-2006.html
Samra kindly if you can guide what actual situation is if I own a property of 1 crore and want to sell the purchaser pages me 1 crore in cash what amount of tax I will be actually required to pay, please guide me on 47shahzad@gmail.com thanks
The financial think tanks seem to be only tanks with mouth but no brains, how do they justify the million dollars remittances coming to invest in lands of large cities, if the small investor is somehow making money out of property they ultimately spending within the country and money is somehow is in circulation and this is for sure that military mechanism of acquiring land have some or wil make some acts to be exempted from these stupid policies.#Dha
Samra BB! A Turbulence in water pond finally Becomes Silent as Nature tends to attain Equilibrium. So, same will be in Property market. it will adjust itself very soon. No Big Issue
These steps would have been good if the government had instituted a positive business environment. In current situation, where Pakistan has a very difficult and discouraging business environment, these new rules will result in outflow of money from Pakistan. People will invest elsewhere. So for Pakistan it’s just a myth that these rules would result in job creation and GDP growth.
A person who purchased by taking loan from bank?
And what is from 2006?
you are 100 % correct these corrupt people have destroyed the country economy now it’s time to pay back.
I would also like to know the impact of new mechanism on Overseas Pakistanis, can any Property / Tax expert answer this question?
Regards;
Dear Zahid Sb, policies made by black sheep can never be right move but single directional. When these thieves plan to import BMW & Mercedez then lower custom duty and when their job is done then increase custom duty. These corrupt politicians are land grabbers in fact. Real estate king like Mali Riaz etc are their friends and parter. I think now they have taken out their black money some where else before imposition of this new ordinance. Either this is correct or they want fill up their pockets otherwise these black sheep have no interest in the welfare of poor man of the country.
This means potentially Bahria can skyrocket. Black money will find its way to this alternative. Correct?
Absolutely, this is a timely market correction mechanism as normally happens in speculative buying. Market will adjust gradually. But it would be more beneficial overall for manority of the people. These dead investments were benefiting none but few grafters. Some people who were genuine but were used to easy money. The present trend of property market was fatal forthe agriculture and economy . Millions of acres of agri land has been sacrificed to the grred of the few. According tothe excise department, only in Lahore 650000 plots are vacant after development. what for? So that greed of few could be wetted. Had there been genuine buyers in the market, they would have built houses their. What is that investment in raw land for years and years.
Well done gov. This would make available money in real savings and loans for industry and business. Moreover, the people who have purchased hundreds of plots for no good reason but to hide their ill gotten and untaxed money, will be exposed and would benefit the national exchequer over a long period time
Dear Samra.
Is this rule applicable to expats as our income is from outside Pakistan. I think foreign remittance and it’s investment is nothe tax able???
Please advise.
Khan
Not sure about it but will surely find out and cover it in the blog soon, insha’Allah.
Hi Khan,
Yes, it will be taxable. Foreign remittance (earned outside of PK) is itself only exempt from tax however transaction within Pakistan is a local activity and taxable.
Regards,
The bafoon has absolutely no idea what economy is and how to bring the country out of current situation. Instead of giving any certain policy and trying to put the ship on right course. The PM is absent, agriculture showing negative growth first time in the history of Pakistan. Nothing solid seen for electricity. Just putting in taxes so that these buggers (who by the way have no love for PK) can continue looting this country more to invest abroad, have their kids abroad and running this country just for the sake of minting more money. For God’s sake this is not a private business this is a country a nation which needs direction and solid measures. Darshan stints will not do much probably the current system can’t correct itself as they are all equally corrupt. A major overhauling is required. I hope we are able to get a sincere capable God fearing leader to lead us and bring all these looters to strict justice. Money launderers lead us, what else we can expect.
Overseas pakistanis are sending 18 to 20 billion USD every year where this money is going for sure property as they cant establish business in absence…this assumption that 3000 billion is black money is absurd now these remittances will shift to somewhere else outside pakistan..but these jerks in power will only understand after getting big shock and loss in remittances
nobody is forcing to take money out of property but its a matter of principal a 4 carore plot cannot be registered at 12 lakh rs its fair value shud be determined. its a right step but needs to implemented rightly as well
It seems a massive hit in terms of additional taxes to genuine buyers and investors. The people who have some savings and they want to invest it (rather save the value of their money from inflation) or want to utilise that property at later stage, then it’s not illegal. They already paid different fees, stamp duties, CVT etc etc so what else Govt need to know?
If property agents would have only worked on 1%of their commission and property societies would have only charged reasonable amount of transfer fees then Pakistani property would never have gone so high. In fact continuously selling properties at higher prices made a ripple effect on increased property prices and now Govt have decided to jump further to have their share from this cake. I live abroad and govt do charge taxes on buying properties however they provide us double return to us in terms of facilities. What Pakistani government will enhance in terms of benefits for the property owners after increasing taxes? Whatever is the mechanism govt must emphasis that hard earned money of real buyers/investors and overseas Pakistanis should not be effected.
Tax on properties for investment is one thing and a lot of discussion is going on which is a healthy sign. It may be a “Bubble Burst” and property value is going to see a “Nose Dive”. But, keep in mind we are talking about tangible assets called “Properties”. A contract to buy or a File by itself is not a Property thus will not fall under the purview of present taxation law. A file purchased today is no more than a contract, its not even a Title; it will take several years before a file converts into a “Property” and then be subjected to any taxation.
I have lately been hearing from friends that lot of bureaucrats and even politicians were seen selling properties (mostly plots) and buying Files. Now I understand the recent crazy jumps in prices of Files as compared to Properties. These are the people who know what is coming and they steer the market. Recent example of DHA Multan is in front of us where around 40% price appreciation was seen in trading of Files just weeks before these taxation changes. DHA Multan, who was considering till few months back launching price around Rs. 5.5 million, is now perhaps considering to raise it Rs 6 million or more.
If the government is really interested or serious about expanding tax net and attract investments and create job opportunities (though i doubt their seriousness), following should be done in the Real Estate market:
1. Make it mandatory for all mega developers like Bahria and DHA to allocate 20-25% quota for overseas Pakistanis with at least 25% price margin and 5 years tax break from actual take over of Plot. This will attract lot off foreign exchange giving overseas Pakistanis a huge investment incentive.
2. Presently millions of developed plots are sitting un used. Whereas most developers levy some kind of fee on un used plots, but government should impose a tax or duty on such properties un used properties. This will generate huge construction activity and millions of jobs.
3. Government should encourage use of alternative eco-friendly construction materials and encourage small entrepreneurs through duty free import of machines, excise duty relief, availability of gas and electricity on priority and reduced tariffs for such industries and discourage “Bhatta” bricks.
These are just a few thoughts. One can think of several other short term to mid term measures those can bring revolutionary changes in Real Estate market.
Friends, keep contributing your valuable ideas.
How will FBR propose fair market rates in retrospect? The price of land is not the same in any locality for all years. For example if the sellers are to pay CGT for a plot bought two years ago and sold it before the completion of three years the actual price was much less than what it is today.
This will be an unfair system of tax collection unless FBR produces a list of enhanced DC rates for each year for all localities staring from 2012. Moreover, no where in the world are taxes collected for past years when the rules are changed in the present year. What about rates of non possession undeveloped plots of DHA and Bahria? they cannot be treated at the same new DC rate set by FBR which will be unfair.
FBR announced new rates for 15 cities area vise. Are these rates applicable or everyone still have there own rates ?
Thanks
Dear Team,
Plz make a new taxes calculator for a lay man to calculate new taxes ie. CVT, Stamp fee of 10 marla plot in engeering cooperative society Sector A Lahore.
These forms of taxes are not painful when paid in a country where the government provides even basic facilities to their citizens and not in a country where the citizens, by the so called democraZic leaders, are punished for being citizens. It’s quite sad that In these sufferings where government cannot provide jobs to their youths if few people associated to the property business trying to support their families with little income through this business will also suffer now with no money. Is it a joke to pay Rs60,000 just to withdraw your own Rs1 caror from the banks for once? Is it a rate of commission paid by public even in USA???
well samra zulfiqar hi,
my name is arif hashmi,i want to know how to find the real price value of my place.
it is located 15th national highway landhi karachi,near manzil pump stop.
it is industrial plot.would u help me. thanks.