As you are aware, the real estate market in many cities of
Pakistan have mostly been serving the end users, where societies featuring
affordable options performed rather well. These societies were also investment
hotbeds for some investors looking at small yet quick gains. In the meanwhile,
there was absolute silence by investors who would not settle for less than
prime projects.
Multiple factors contributed to the situation, where
restrictions imposed by the previous government on non-filers for buying
property more expensive than PKR 5 million was one. With the decision now
reverted, the situation is expected to change. Here is what stakeholders think
about it.
A decision made just in time
The real estate developments that previously interested
non-resident Pakistanis for investment maintained a low profile during the last
couple of years. In the absence of a decent number of active buyers, many of
which are essentially non-filers in Pakistan, any market can shatter. The same
was witnessed in prime real estate projects of Lahore and Islamabad. And quite
interestingly, the rates were kept from crashing down due to strong holding
power of the stakeholders.
And it is also true that selling pressure the market had
lately started to mount off. The announcement has come really handy, believes
Malik Tayyab Pattal of Mahad’s Estate & Developers, who has already started
to notice a rise in interest among potential clients from overseas.
Not the same for all cities
Shahbaz Mukhtar of Urban Consultants is of the view that
the impact might as well not be witnessed right away in Islamabad as the city
is rich in options cheaper than PKR 5 million. Mukhtar believes that
availability of these options where an active pool of investors are already
busy at, we might not come across seeing some societies making a major
comeback. Even if there are some, the demand will remain high for affordable
options due to their existing demand among the end users.
Mukhtar also see addition of 5 million affordable housing
units as major game change in the country, where the sector will perhaps be
actually working in full swing help its target audience; the end users.
The change was inevitable
The low and high tides of real estate investment cycle
calls for changes in demand to maintain its circle of life. With current rates
lower by at least 15% across some major real estate developments in the
country, many buyers have been waiting for the whistle to blow to start
reinvesting. According to Imran Shabbir of Richmoor Real Estate, the timing for
the announcement seems perfect for investment. And since the options under the
current scenario aren’t limited, a far and wide impact on the market is
expected to be witnessed.
Shabbir has started to guide his clients accordingly,
where he believes that buying property as soon as possible could be a wise move
to make. Property sellers, on the other hand, should wait for the market
activity to go up.
Clarity on some aspects demanded
For tax-filers who weren’t restricted from buying property
under a certain price limit, the confusion on taxation system introduce in the
budget 2018-19 remained the main hurdle. The condition set by the previous
government where the Federal Board of Revenue could buy back property at rates
higher than the property’s declared value had raised reservations among the
potential buyers. In addition, confusion also existed on calculation of Capital
Gains Tax. In such set up, some buyers and sellers had to sign affidavits for
carrying out the transaction and this can happen only when there is an urgent
need to buyer or sell property.
For encouraging foreign investment in the real estate
sector and hence collecting decent revenue from it in form of taxes, an urgent
attendance to these taxes is needed. While the stakeholders don’t actually
demand for the taxes to be rolled back, they want the authorities concerned to
established clarity. And if increasing investment activity is intended,
introduction of flat tax rates can do much better.
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