Budget 2017 and Pakistan Real Estate Sector' s Performance
As we all know that budget 2016-17 revamped the valuation and tax regimen of Pakistan real estate sector and now the budget 2017-18 has also proved to be unpleasant for the realty sector. However, real estate experts agree that one should not blame the sluggishness of property market on budget alone as several other factors also contributed to this slow down.
From second quarter of 2017, the activity had been slow as investors were in hope for better news from budgetary changes and after that the market slowed down due to holy month of Ramadan. Pakistan property market experienced the same situation in 2016 but it tried to bridge the gap between the DC rates and the actual fair market values. Apart from increasing the base for taxation purpose, the FBR has also increased the Capital Gains Tax (CGT) and Withholding Tax.
The announcement of this budget, amidst many speculations and reservations, left many people unimpressed, though it held some initiatives, protections and opportunities for the real estate sector. Most of the experts say that Budget 2017-18, in terms of real estate, has an inclusive approach – which means the budget does not only cater to Pakistanis living in the country but those abroad too, giving them opportunities to invest in real estate in Pakistan.
The budget does not explicitly call for overseas investors but the diaspora is encouraged to invest and contribute in the development and infrastructure of the country. After budget announcement, an increase in the cost of building and construction material will be observed, which will obviously be a problem for people planning to build their home in the coming year. However, the tax levied on the builders and developers in previous budget has been lifted. It may posed to be a little positive thing (in form of compensation) for both parties.
The government is also willing to share in the risks of home financing, catering to low income households, guaranteeing a 40% credit for home financing. One home may be insured for PKR 10, 00,000. The three-tier system of the Capital Gains Tax (CGT) tax has been lifted, but a 15% increase for filers and 20% for non-filers has been announced.