PTBP Web Desk
the housing and real estate sectors, the Task Force for Development of the Housing Sector has put forth an extensive set of recommendations. These proposals aim to alleviate the burden of taxation, encourage investment, and foster sustainable development within Pakistan’s real estate market.
The core of these recommendations centers around the abolition of Section 7E of the Income Tax Ordinance. This section has been a contentious issue for property owners due to its complex implications on income tax. Additionally, the Task Force suggests the removal of the Capital Value Tax (CVT) in Islamabad, which has been seen as an additional financial strain on property transactions in the capital.
Another pivotal recommendation involves reducing transaction taxes on buying and selling immovable properties. Currently, these taxes stand at 12-13%, which has significantly slowed down the market activity. According to a senior official from the Federal Board of Revenue (FBR), without these reductions, investment capital is likely to be diverted abroad. This assertion comes in the wake of a noticeable decline in property transactions, which have dropped by over 50% or are being conducted under less transparent methods like “power of attorney” due to the high tax rates.
The recommendations extend beyond mere tax adjustments. The Task Force has outlined comprehensive short-term, medium-term, and long-term strategies for housing sector development:
Short-Term: Immediate actions include reducing the Policy Rate to a single digit to make borrowing cheaper, reinstating the MPMG Scheme to boost developer confidence, and reintroducing mark-up subsidies for low-cost housing loans. There’s also an emphasis on enhancing consumer education through financial literacy programs and collaborating with developers to offer diverse mortgage financing options.
Medium-Term: The focus here is on digitalizing the approval processes for building and housing schemes to ensure they are both time-bound and transparent. The Task Force proposes incentives for vertical constructions through tax benefits, green building initiatives, and solarization, aiming to utilize space efficiently and reduce environmental impact.
Long-Term: Long-term goals include revising property valuations every three years to keep them aligned with market dynamics and introducing exemptions from transaction taxes for certain categories like low-cost housing and first-time homebuyers. The vision also involves developing high-density zones and defining housing affordability in clear monetary terms, setting a range from Rs 50,000 to Rs 200,000 for targeted policy implementation.
The Task Force has called for a collaborative effort between federal and provincial governments to ensure these reforms are reflected in the upcoming budget. They advocate for uniform taxation policies across the board to eliminate disparities and promote a more equitable market. Furthermore, there are calls for streamlining verification processes through systems like NADRA for non-residents to facilitate easier property transactions.
Understanding the reluctance of investors towards the stock market, the recommendations aim to make real estate a more attractive investment avenue. By facilitating the construction sector with tax waivers and relaxed building regulations, the Task Force hopes to stimulate economic growth and provide more housing options, especially for low and middle-income groups.
