Pakistan Budget 2019-20 Property Tax Amendments & Real Estate Market Forecast

The Government of PTI on Tuesday 12 June 2019, has presented its first historic budget. In this budget, the Government has increased the Taxes for many sectors whereas many sectors got relief. Public opinion about the budget is mixed.

But it would be nothing wrong to say that this budget 2019-20 is nothing less than a shock for the Pakistan Real Estate Sector Pakistan.  It is because the budget seemed friendlier for genuine buyers than the sellers, realtors or investors. The federal government has planned the budget will a vision to collect higher taxes from the property sector. So let discuss the impacts of the budget 2019-20 on Pakistan Real Estate Property Sector.

Pakistan Real Estate & Budget 2019-20

Non-filers:

• According to the budget, Non-filers have been allowed to buy a property worth 5 Million PKR or more but;
• Non-filer has to file returns within 45 days of the purchase of the property.
• Otherwise, within half an hour after the gap of the 45-day period, automatic taxation will take place asking the purchaser to disclose the source of income.
• In addition to that non-filer has to pay 5% amount of property price as a penalty as per FBR Rate.

Purchase of Property Worth 5 Million PKR or More:

• Anyone who buys a property worth 5 Million PKR or More has to prove the source of income.
• Anyone who buys a property worth 5 Million PKR or More has to pay through Banks.

Capital Gain Tax for Empty Plots (CGT);

• There will be 100% profit amount/gain to be taxed if the plot is sold within 1 year of purchase.
• The government will charge taxes on 75% profit amount or gain if the plot is sold within 10 years of purchase.
• There will be no taxes on profits if plots are sold after 10 years of purchase.

Capital Gain Tax for Constructed Property (CGT);

• 100% profit amount to be taxed if the constructed property is sold within 1 year of purchase.
• The government will charge taxes on 75% profit amount if the constructed property is sold within 5 years of purchase.
• There will be no taxes on profits if the constructed property is sold after 5 years of purchase.

Formula to Calculate Capital Gain Tax (CGT):

Capital Gain or Profit will be treated as income and will be subject to normal income tax.

Withholding Tax (WHT):

• Withholding Tax is decreased from 2% to 1% for filers. WHT will be collected as per the FBR Property Valuation Rate.
• Previous there was no WHT on purchase of the property if the price was less than 4 Million PKR. But now WHT will be collected on all transactions.
• Earlier there was no WHT if the property was sold after three years of purchase. Now WHT will be collected up to 5 years. But if selling the property after 5 years of purchase then no WHT.

FBR Property Valuation Rates:

FBR Property Valuation Rates will rise up to 85% market value.

Pakistan Real Estate & Opinions

Dealers Opinions & Concerns

Real Estate Agents are totally disappointed by the property tax adjustments made in the current budget. According to the opinion of some realtors, they were expecting some relief for the property sector. Currently, Dealers are demanding to give permission to buy the property to non-filers and also wanted a decrease in FBR Rate. The budget is a big shock for the real estate market of the country and it has bad effects on the business of real estate agencies.

Investors Opinions & Concerns

Real estate market of Pakistan is the most famous place of investors to park the illegal money but also a great option to earn a quick profit. But after the budget 2019-20 and the property tax amendments, investors have lost the charm. Now an investor will have to hold the property for many years to avoid taxes. This has made the real estate sector less attractive for investment.

Sellers Are In Shock

After this budget 2019-20, Sellers are totally disappointed. They have three concerns. First, it is really difficult to find filer buyers. Second, they will have to wait for many years to sell their properties otherwise they will have to pay higher taxes. Third, as the real estate sector is become less attractive for investors so it will be hard for sellers to buy buyers.

Budget Is For Genuine Buyers

These property tax amendments have proved that genuine buyers with white money are the real winners of budget. First, they will pay fewer taxes on the purchase of fixed properties. Second, genuine buyers will have more options to buy properties as there will be more properties in the market than buyers. Third, these new tax amendments will reduce the prices of the property so genuine buyers will purchase properties at big discounts.

For more updates and real estate market news, contact Universal Property Network.