Pakistan Mini Budget 2019 and Property Market | Impact of Mini Budget on Pakistan Real Estate Sector:
On 23rd of January 2019, Pakistani Finance Minister Asad Umar presented the Mini Budget 2019. Asad Umar has termed this as a package to reform the economy of Pakistan. The budget has been hailed as business friendly by many economists and welcomed by the traders. Let’s discuss Pakistan Mini Budget 2019 and Property Market.
Salient Features of the Supplementary Finance Bill 2019:
Non-filers can buy property worth only up-to 5 Million PKR (no changes in property taxes).
Rs. 5 Billion fund to be allocated to provide interest free loans for the construction of small homes.
Special economic zones will be formed for CPEC.
Non-filers can buy cars up-to 1300cc but with increased tax.
Duty on cars above 1800cc fixed at 25 per cent.
30% tax imposed on mobile cards.
Taxes on low priced phone will decrease but on expensive phones will increase.
Withholding tax on banking transactions (deposits/withdrawals) abolished for filers.
Tax reduced from 39% to 20% on loans for small businesses, low income housing and agriculture sector.
Advance tax on stock exchange members abolished.
Income tax on small marriage halls up to 500 SQ FT reduced from Rs. 20,000 to 5,000.
5 years income tax immunity on investing in Greenfield Projects.
Investment in solar-energy projects exempted from taxes.
Taxes reduced for many raw materials.
Super tax on non-banking companies to be abolished from 1 July, 2019.
Pakistan Mini Budget 2019 and Property Market; IMPACT:
MARKET FORECAST:
The government has maintained the restrictions imposed in Mini Budget 2018 for the Non-filers who can’t buy property worth more than 5 Million PKR. High end luxury real estate is the real victim as it’s hard to find a filer buyer. Real estate transactions will remain subdued for the years to come. The level seen in 2016 will repeat only in 2022 or beyond. But small scale properties under price 5 Million PKR will have strong demand due to better affordability.
The property buying restriction for non-filers, government’s property buying back scheme, penalty to handle transactions of non-filers and restriction for overseas Pakistanis to send money within 60 days of property transaction has already crashed the real estate market in Pakistan. The government wants to convey a simple message that buyers and sellers have to show the source of income.
PROPERTY PRICE FORECAST:
Pakistan Real Estate Property Prices are already sliding due to low investments and high interest rates. Prices are down by 35% from the peak of 2016. Real Estate Agents expect another 35% price fall from peak of 2016 or 50% price fall from current level as there are no buyers in the market and property transactions are record low. This price forecast is realistic as Dubai property prices have already crashed by 75% since 2008 and another 5-10% price fall is expected in 2019. The abnormal property prices in Pakistan and Dubai were only due to the massive black money investments. Without easy flow of black money, no one cash stop the crash. Property prices observed in 2016 will be seen again only in 2022 or beyond when buyers affordability will increase due to the rise of Pakistani Economy.