Uncertainty Sparks Slump in Pakistan Realty Market
Confusion about market valuation, increase in capital gain tax and retention period condition have to severe reduction in number of transactions during the last two months forcing many real estate agents to close down their businesses. Experts are of view that the current amendments to valuation and tax laws had a good motive but terrible planning is leading to panic and economic depression.
Government has simply shattered the confidence of general investor and before this, more than $7 billion investment was being made every year by overseas Pakistanis in real estate sector alone. However, this trend has seen a sharp decline after the recent and sudden changes to tax rules – Pakistan is losing the opportunity to attract significant amount of remittances, which are now finding their way to other countries.
Construction sector has been contributing significantly to the growth and development of the economy as it support dozens of other sectors and providing direct or indirect employment to millions of people. It was because of its potential to help tackle problems confronting the economy that the Government of former Prime Minister Shaukat Aziz offered liberal incentives to the construction industry and as a result it demonstrated a robust growth and also contributed hugely to national exchequer.
This is also true that those who are in business of real estate have been minting billions but did not pay their due taxes so it was essential to bring them into the tax net and make them pay what they ought to. However, experts are of the view that it should be done gradually and in a fair manner to ensure that the prescription being proposed does not hurt the sector negatively.
The timing of the measures announced by the Government has also forced some analysts to conclude that these were aimed at diverting the local money to the real estate market of Dubai, where many influential Pakistanis with right connections have invested money but the market was witnessing recession. Now there are also reports that the money is fleeing to Dubai and other foreign destinations due to repressive taxation measures conceived and forcefully implemented by the Government.