KARACHI: The real estate sector has criticized the recent upward revision in the plots’ values by the Federal Board of Revenue (FBR) saying the decision was taken without taking the stakeholders onboard, and termed it anti-investment.
FBR jacked up valuation rates of real estate plots in the range of 15 to 25 percent on an average in all the major cities of the country in a bid to increase tax collection up to Rs75 billion. In some posh areas of Karachi, the FBR has jacked up valuation rate in different ranges, starting from 15 percent and going up to 110 percent depending on the locality of the city.
Chairman Association of Builders and Developers (ABAD), Hassan Bukhsi said the rates were revised without the consultation of the stakeholders. “It is a sudden move and we didn’t even know that any such exercise was being planned.”
He said ABAD had proposed to eliminate both the DC rates and the FBR rates, so that properties could be booked on actual transaction values. “We had proposed that federal government and provincial government could collect 1.0 percent each as tax on transactions based on actual value, as this could discourage under-declaration,” Bukhshi said adding their proposals were not considered.
Realtors and builders do not expect a housing rate slide in the middle-low income areas of urban centres, but they do foresee prices falling in posh areas where the market is driven by investors.
Bukshi said the real estate and construction sector was already very slow as there was political and economic uncertainty, while the policies were being modified by day. “There is no buying and selling in the market. This recent revision in values would further worsen the situation for the industry.”
Chairman ABAD said real estate sector was the largest employment generator after agriculture and as this industry slowed down, millions associated are affected. Bukhshi informed that the situation was reviews across the country and the association would announce its future course of action on Monday.
The volume of activity is next to zilch as investors are driven out while a mismatch of demand and supply keeps deals from materializing.
Senior Vice President Federation of Pakistan Chamber of Commerce and Industry (FPCCI), Mirza Ikhtiar Big said it was unjust for the FBR to take such a measure without consulting the stakeholders. “The industry is already in trouble after 930 commercial buildings in Karachi were given demolition notices. This upward revision in the property values would hurt the industry a lot.”
Baig said FBR should consult the stakeholders before taking any revenue generation measures so that market uncertainty could be avoided.
Advisor to President FPCCI Mazhar Ali Nasir, on the other hand, appreciated the decision saying revision in property valuation would discourage black economy. “Actual property values are still much higher than the recorded values and these need to be increased further going forward.”
The property market in Pakistan has grown vertically since 1990s, pushing unit price beyond the reach of ordinary people. The promise of quick- high- returns attracted both households and investors to the arena. Besides, the undocumented status made it an ideal destination to park unaccounted wealth.
“Dollar is trading at around Rs140, discount rates have been increased by 4.5 percent in a year, and now this much increase in property values. These measures are only going to dampen investor sentiments,” Zeeshan Khan a real estate agent said adding the market values of properties would not come down instead cost of buying and registration would increase.