Real estate prices in Pakistan have reduced as a result of tax reform and are now investment-worthy. People who do not own a home or a residential plot are purchasing them to safeguard their future. For only a few months, the real sector has risen to become one of Pakistan’s most important economic sectors. Because of the price drop, it is a fantastic chance for those with resources to engage more in the property market like smart cities. People with resources are engaging even more at reasonable prices to profit at higher rates in the future. Pakistan’s property markets appear to do quite well as a result of this investment. There is no doubt that the real estate market will expand in the following years. Nonetheless, there are several obstacles to success in Pakistan’s real estate business.
Non-filers’ Taxes:
The imposition of a tax due on non-filers on financial transactions, as well as FBR warnings to banking customers requiring them to verify their money origins, is destroying investor trust and forcing them to conduct banking services in cash. According to previous Finance Minister Asad Umar, up to 37% of banking operations are completed in cash, limiting the banking industry’s capability to loan. This needs to be taken loosely to 25pc. However, in Bangladesh, the cash-to-deposit proportion is at 16pc, he noted.
Complex Protocols for Overseas Pakistanis:
Pakistan’s expatriate is a valuable resource because they send large sums of money back to the country. Pakistan collected an unprecedented $21.84 billion in remittance in 2019-20, per the central bank. The government must recognise that because they cannot conduct business in Pakistan, foreign Pakistanis exclusively invest in property development. Complicated procedures, high taxes imposed on non-filer foreign Pakistanis, and the obligation of visiting Pakistan to complete the property acquisition process are just a few of the numerous factors that have deterred Pakistanis from investing in the real estate business.
Unexperienced Realtors:
The real estate industry has been taken over by inexperienced brokers and dealers who lack the essential expertise to steer people forward, resulting in fraud. There’s a need in the nation for a Federal & Regional Real Estate Administration to shield land allottees’ entitlements. Furthermore, because the land consolidating process takes several years, it is critical to overseeing the creation of communities by developers and builders. The presence of some estate regulatory bodies will increase people’s trust in investing their hard-earned wealth in this sector, particularly foreign Pakistanis.
The FBR’s Overregulation:
The property market and stock markets serve essential roles in a country’s economic progress worldwide. However, due to the FBR’s excessive regulation, the housing market in Pakistan is unable to fulfil its full potential. There is currently no tax on property that has been owned for longer than four years. However, if a property valued at Rs 5 million is transferred within four years, a 5% tax would be applied, and a 15% tax will be charged if the property is sold within ten years of possession. There is no remedy in raising the tax rate or barring non-filers. To extend the tax net by motivating non-filers to become filers, only well-articulated research is necessary.
Inadequate Solutions:
As there are over 100 industries primarily and partly tied to the real estate industry, the government must grasp that its two programmes of 5 million residential projects and 10 million employment schemes would only succeed if the property market grows. The property boom will promote expansion in other businesses, such as construction, which contributes to 2% of Pakistan’s GDP. It would not only assist in alleviating housing shortages, but it will also create employment chances for our rising youth, who make up 60% of our 220 million-strong population. To address the urbanisation challenge, the government must create new cities alongside large metropolitan areas.
Massive Taxation:
Due to various limitations on non-filers and the imposition of hefty levies on already tax-paying residents, the market is currently contracting, and investor trust is destroyed. To expand the tax base, the government must develop long-term initiatives. Taxing the already-taxed will harm the economy in two ways: first, it will pull the tax base as individuals will switch to cash dealings instead of banking transactions and conceal their capital; second, investors will plant their income outside of Pakistan, buying properties in the United Kingdom and Dubai, and making investments in offshore businesses. It is necessary to take a step-by-step approach to alter the system, as quick adjustments can have detrimental consequences for the economy, particularly real estate.
Conclusion:
The government and the relevant industries must implement initiatives in the system gradually and consistently in order to have a good influence on both the property market as well as the Pakistani financial system.
Author Bio
Muhammad Junaid is a senior Analyst and Search Engine Expert. Extensive experience being a lead writer in Sigma Properties |taj-residencia. Work for years with local and international enterprises. Also, represent well-known brands in the UAE.