Effects of budget 2017-18 on real estate sector
Effects of budget 2017-18 on construction sector
ABAD and builders are at advantage
Association of Builders and Developers of Pakistan (ABAD) and builders are at advantage as construction taxes imposed in the last budget have been withdrawn. In the last budget construction taxes were imposed according to different cities and property types. These taxes resulted in less tax collection and now government has withdrawn these taxes to boost the construction sector.
Individual home builder is at disadvantage
Taxes on cement and steel have been increased. The government has increased the Federal Excise Duty (FED) on cement from Rs 1 Rupee per kg to Rs 1.25 rupee. Taxes on steel have been increased from 9% to 10.5%. This will ultimately increase the home construction cost.
Effects of budget 2017-18 on property market
Low sale volume and low income for estate agents
Capital Gain Tax has been increased in the budget 2017-18. For non-filer CGT is 20% and for filer its 15%. Due to the increase of CGT, property speculation will decrease and this will also decrease the volume of real estate transactions. Real estate agents will see their income slashed which is bad news as more than 30% estate agencies have already closed their offices due to low transactions.
Some price fall is expected for genuine buyers
Property price is directly related to the volume of real estate transactions. Property price increases when transactions are high and falls when transactions are low. Due to low transactions, 20-30% price fall is expected. This is great news for the genuine home buyers who are unable to buy properties due to abnormally high prices.
Approval of real estate developments from SECP
Security and Exchange Commission of Pakistan (SECP)
Pakistanis are always worried about property frauds & scams. To secure the investments of Pakistanis, government has authorized Security and Exchange Commission of Pakistan (SECP) to monitor real estate sector. Now onward, no developer or builder can collect advance payment unless society is approved from SECP. This is indeed the great step to attract huge investment in real estate sector and to secure hard earned money of Pakistanis.