Black Money in Property Market Can Create Bubble
"Just even looking at Pakistan real estate sector, it is revealed that the property business is facing bubble for the last few years and it is bound to burst sooner or later," said Syed Mustafa Mehmood of Pakistan People Party (PPP). "It is better to make this sector resistant to changes instead of waiting for the bubble to burst" he stated further.
However, the sub-committee downplayed the report submitted by real estate agents from Karachi, Lahore and Faisalabad and said that the sector misled the authorities by portraying an incorrect picture that the sale and purchase of properties were declining in numbers from previous year. The sub-committee gas been formed to resolve the anomalies regarding the Federal Board of Revenue' s (FBR) valuation table on property tax.
Another report submitted by the Pakistan Real Estate Investment Forum (PERIF) highlighted that the real estate business in Pakistan suffered, when government allowed FBR to start valuing properties to impose taxes at the time of sale and purchase. And drastic jump in taxation has kept several keen investors from investing in certain areas. The areas identified were SITE Industrial Area, Port Qasim Authority Industrial Area, Landhi Industrial Area and DHA City in Karachi, Anmol Cooperative Society in Lahore, DHA Valley in Islamabad, and Canal Road in Faisalabad.
Moreover, PERIF members also stated that it is a partial list of the areas facing business slow down across the country. Conversely, FBR officials rejected the claim that higher taxes are the reason of slump in property business. As per FBR official, the average market value of a plot in DHA Phase 8, Karachi was Rs50 million but the taxes were filed against Rs900,000 value only.
Tax system was introduced in the last budget to streamline the property sector and resultantly, real estate transactions have been increased in number. FBR officials have highlighted that black money was being injected in real estate sector and these investors were pushing the market value beyond the reach of common citizens. "Property was beyond reach of middle class citizen and government must do something to bring this sector under control," stated an FBR official.
"We need to document the real estate sector and I think that a minor crash of prices will benefit the ordinary Pakistanis with white money," he added further.