KARACHI: Representatives of the estate sector have feared that the government’s tax collection is likely to come down in the coming months as activities in the sector have virtually come to a standstill due to higher tax rates and new valuation tables.
Pakistan Real Estate Industry Forum (PREIF) President Shaban Elahi and General Secretary Ghazanfer Mehboob said if genuine demands of the realtors were accepted and timely action was taken, the government’s tax collection from the sector would have increased by 500-600 per cent.
They said new housing schemes are no longer viable due to lack of investors interest. Overseas Pakistanis investment in real estate has slowed down significantly and capital is shifting to other investment avenues, they lamented.
They recalled real estate transactions had been taking place at Deputy Commissioner (DC) rates for many decades. “The DC rates were not revised suitably keeping in view the rising rates of real estate which led to a significant undocumented or grey economy,” they acknowledged.
“The government’s recent decision to revise the official valuations of real estate is good in principle. However, there is a complete disregard for the problem described earlier. As a result, investors and builders found themselves in a situation where they are unable to declare the source of investment because of past practices in the market,” they added.
They demanded that for past transactions, a fixed tax may be introduced for existing property owners to declare the property at the FBR value, and pay taxes at 1pc on the amount of difference between DC value and FBR value. “This difference amount could then be added to the declared assets after availing such scheme and payment of taxes,” they opined.
Properties held for more than three years or more should be exempted from such taxes.
For future transactions, a fixed tax of 2pc — to be paid by the buyer — should be charged on amount of difference between DC value and FBR notified value. This differential amount could then be added to the declared wealth after availing the scheme and payment of taxes, they suggested.