Amnesty scheme is good for genuine buyers
Amnesty scheme for Pakistan real estate sector
The Federal Ministry of Revenue is preparing the draft to offer amnesty scheme for the real estate sector. In few days, Finance Minister will announce the final draft after approving it. This amnesty scheme will be offered to normalize the real estate sector, which is witnessing the stalled activities. Duration of this amnesty scheme will be 4-6 months and people have to pay 3-4% taxes to whiten the black money. After the time period government will collect the tax as usual. More will be announced in the coming days.
Why government is offering this amnesty scheme?
The billion dollar question is, what are the motives of the government to offer amnesty scheme for real estate sector? Many think that government is helping the people with black money. This is totally non-sense. The government will achieve its two major goals, which were not achieved in budget 2016-2017. Firstly, due to high property transactions, federal government and provincial governments will collect huge revenue in form of taxes. Secondly, government will achieve its target of bringing the undocumented economy into tax net.
Effects of amnesty scheme
Real estate transactions will increase
The immediate effect of real estate amnesty will be the rise in property transactions. The stalled activates in real estate sector will resume again. The people with black money will see a relief and will immediately sell their properties to exit the real estate market. Due to the limited time duration, everyone will be desperate to whiten the black money. Real estate agents will see higher income for short period of time.
Property prices will fall due to more properties in the market than buyers
We are coming to an era of buyers’ market. Buyer’s market evolves when there are more properties in the market than the buyers. This always results in property price fall. People with black money will be desperate to sell their properties at any cost to whiten the black money. People with black money will definitely lower the asking price to exit the real estate sector.
Capital will shift from real estate sector to Pakistan Stock Exchange as it happened when property tax 2016 was announced
At the moment in Pakistan, only Pakistan Stock Exchange is best for investment purpose. Property prices are falling day by day but Stocks are rising on daily basis. Now Pakistan Stock Exchange has crossed the historic mark 41,000. China is willing to buy 40% shares of Pakistan stock exchange as Pakistan Stock Exchange is one of the top 5 best performing stock exchanges of the world. With the entry of Chinese capital in Pakistan Stock Exchange, we will see new mark 50-60,000. So investors will sell the properties at any cost and will jump to the stocks.
Genuine home buyers will get properties at low prices
Like the government, real home buyers will be the ultimate winners. Millions of people with black money will flood the market with properties. Already there are more properties in the market than buyers and this is why property prices are falling. This will ultimately result in more price fall. Genuine home buyers will be on the driving seat. Real home buyers will have more negotiating power and will secure good properties at low prices.