Benami Act implemented by Government:
The government of Pakistan has implemented the Benami Act. As per the law, FBR will confiscate the immovable properties or accounts held on someone else’s name including the relatives. Benami Transactions (Prohibition) Act 2017 was passed by parliament on 1 February 2017 but it was not enforced. As now Benami Act has been implemented by Government, lets discuss its impacts on real estate.
What is Benami?
Benami is a special term used when a person holds assets for the advantage of other person. Benami property and Benami Account are used to park the black money earned by illegal means and also to evade the taxes. In most cases people buy property on the name of their relatives or servants who are owners just on paper. According to FBR, Benami Transactions are the major tool of money laundering.
Why government has implemented the Benami Act?
Pakistani shadow economy is 70% of the real economy as few people pay taxes. The government has implemented the Benami Act due to three major reasons. Firstly, Benami Act will control the illegal practices to hoard properties and wealth as every citizen has to answer about the source of income. Secondly, people will be encouraged to become filers. Thirdly, documented economy of Pakistan will increase whereas shadow economy will decrease.
Awards and punishments under Benami Act
The whistle blowers will be awarded by the government. Three slabs have been introduced to award the people who will indicate the Benami Properties or Benami Accounts. Firstly, whistle blowers who will indicate about the properties of worth up to 20 LAC PKR will be given 5%. In second slab, 1 LAC PKR and 4% property worth will be given to the people who will tell about Benami Property worth up to 50 LAC. In third slab, 2.2 LAC will be awards to the people who will indicate the properties worth more than 50 LAC PKR.
But the people who will provide the wrong information will be imprisoned for 6 months to 5 years. Similarly people who will have Benami Property or Accounts will be imprisoned for 1 year to 7 years and assets will be confiscated.
Who will come under the Benami Act?
Benami Act will be applicable on all properties and accounts held on someone else’s name after 1 February 2017.
Impacts of Benami Act on Real Estate
Benami Act is a new wave of crackdown against black money. Benami Act will firstly slow down the investment of black money into real estate sector. Secondly it will help in cooling down the property prices. Thirdly the genuine buyers with white money will be able to buy properties at affordable rates. According to real estate agents, 40% property price decline will be observed by the end of the year 2019.