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Real Estate will No Longer Be a Safe Haven

12/07/2016

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Real estate has always been considered as one of the safest investment vehicles and people prefer parking their savings here as compared to any other option. It is observed that people started investing their black money in real estate due to the credibility and positive outcomes of this sector. But this will no longer be a favourable option for investors. As per Adviser to the Prime Minister on Revenue Haroon Akhter Khan, real estate will no longer be a safe haven for black money as a new finance bill has been passed.

The PML (N) government took this decision after observing the happenings of real estate sector over the years and it is found that thousands of billions of rupees had been invested in real estate to evade taxes and secure black money. "After passage of the Finance Bill 2016, this money would be brought into the tax net and price of property would be evaluated by third party under the notification of the State Bank of Pakistan," he said.

As we all are aware of the fact that government officials have been unable to keep the officials records updated, therefore, the value of land is estimated by means of calculated conjecture by the deputy commissioner' s office (DC). This DC value is veritably understated and has not been updated for much of the country over the years.

The disparity between the DC land value and actual market price means that despite government' s effort to increase taxes on property transactions to restrain the real estate bubble, the measures made little difference – since taxes are calculated as a percentage of heavily undervalued DC prices. Things need to be changed now as this is the right time.

"Billions of rupees of black money have been invested in this sector, right under the nose of the government, but now authorities will discontinue the DC rate and a third party evaluation would be done where the government would deem it necessary."

The government has taken this decision not to discourage investors but to bring these investors and real estate investment money in tax net. ""We will provide incentives for documentation of this sector. We already have certain rules for the purpose and more rules will be put in place," he stated further.