Pakistan Real Estate after Budget 2018 Amendments
Pakistan Finance Minister Miftah Ismail presented the Budget 2018-19 on 27th of April 2018. The opposition parties raised their voices against the budget and suggested many amendments. Recently National Assembly has passed the Finance Bill 2018-19 after some amendments. Lets discuss Pakistan Real Estate after Budget 2018 amendments.
Property Laws of Pakistan Finance Bill 2018-19
- 1% advance tax on real estate transactions. This will be adjusted in annual tax returns.
- Federal government will charge just 1% tax from 1 July 2018.
- Provincial governments are also requested to bring down taxes to 1% from 1 July 2018.
- FBR & DC Rates will be abolished from 1 July 2018.
- Non filers can’t buy property of worth 5 Million PKR or more.
- FBR to prescribe one page E-return for Pakistani Expatriates to buy property in Pakistan.
- FBR will be allowed to buy back property from 1 July 2018 after paying 100-50% more prices declared at the time of registry.
Why government has taken such a radical measures?
The government has taken these measures due to four main reasons. Firstly government wants to make the real estate transactions affordable by lowering the taxes. Secondly government wants to award the tax payers. Buying a property in considered as a privilege so only tax payers should avail it. Thirdly it will end the black money investments in real estate sector. Fourthly these measures will crash the property prices. As government can’t afford to provide affordable housing for poor, but by new laws millions of Pakistanis will be able to buy property at low rate.
Current situation / Pakistan Real Estate after Budget 2018 Amendments
Pakistan real estate prices are 15% down since January 2018. This is a good indicator of property price trends in Pakistan. Such a huge price fall even before the introduction of new laws in budget 2018-19? The real issues in Pakistan are not the taxes by the crackdown on black money. Currently NAB is investigation 1000’s of housing schemes and property scams. This has reduced the black money investment in real estate sector. Another indicator is the file transfer in DHA. Currently 5-7 files are transferred everyday in DHA Lahore whereas the volume was 180-200 daily transfers in 2016.
Winners and losers
The current laws will reduce property speculation. Only genuine buyers will buy the property for living or establishing businesses. The days of SATTA CULTURE in property sector are numbered. Non filers buying limit will only benefit the honest tax payers. So genuine buyers / honest tax payers are the real winners whereas people who bought properties when prices were high will see massive loss. Currently real estate transactions are low so incomes of estate agents are also low. Low prices will see increase in real estate transactions due to that realtors incomes will also increase.
Impact on Property Prices
Currently property prices are highly un-affordable in Pakistan. But the new property laws will totally crash the market. It is expected that from 1 July 2018 property prices will fall by more than 50%. This price fall will be followed by many years of stagnation. This trend is not unique as discussed many times. Dubai property prices are still 30% down from peak of 2008. So Pakistan will observe the Dubai style property crash that will be followed by many years of price stagnation.
When to buy property?
This is the most common question. The simple answer is that the right time to buy property is when there is buyer’s market. A market where properties are more than the buyers is known as buyer’s market. In a buyer’s market buyers are at advantage as they have many options and prices are really affordable. Pakistan will soon witness the buyer’s property market. But still if people want to know the exact time to buy property then the last quarter of 2018 looks ideal.