ISLAMABAD: Just months before the general elections, the federal government slashed on Thursday property valuation rates by up to 57% for six major cities, partially reversing a policy designed to plug lacunas that caused accumulation of black money.
The move came despite the fact that the second phase of increase in property valuations for two-dozen major cities has been due for the past seven months. An average increase of 25% to 30% in property valuations had to be implemented under this phase from July 1, 2017.
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Former finance minister Ishaq Dar had unveiled a three-year programme in August 2016 in consultation with realty-sector stakeholders for an upward revision in property valuations to bring them in line with the market.
However now, instead of increasing the rates for the collection of federal withholding and capital gains tax, property valuations have been pushed down for certain localities of Karachi, Lahore, Islamabad, Rawalpindi, Peshawar and Faisalabad.
In certain cases, the rates notified in August 2016 were slightly higher, but the Federal Board of Revenue (FBR) had planned to make corrections at the time of implementing the second phase. In August 2016, the FBR had notified fresh property valuation rates for 21 major cities.
On Thursday, the FBR issued six separate notifications, which will not only affect federal tax collection, but will also encourage further accumulation of black money.
Owing to gaps in tax laws and different property tax rates, real-estate players declare two types of property prices – one for paying provincial taxes and the other for federal taxes. However, both of these prices are far lower than the prevailing market rates.
Such a difference has led to the parking of over Rs7 trillion in the real estate market over the years. In June 2016, the government attempted to bridge the gap, but ended up offering a tax amnesty scheme.
People legalised over Rs290 billion worth of black money in just three months of the current fiscal year in return for paying a paltry Rs877 million in taxes under the amnesty scheme.
According to the FBR’s notification, the valuation rate for open industrial plots has been reduced by 20% to Rs9,603 per square yard. The rate for built-up industrial parks has been reduced by 36.5% to Rs1,905 per square yard.
The valuation rate for the Defence Housing Authority (DHA) Karachi has been slashed by 17.5% to Rs7,500 per square yard. These rates are many times lower than the prevailing prices in Karachi.
The FBR has cut valuation rates for seven localities of Lahore in the range of 4.3% to 51.5%. In Allama Iqbal Town, the EME Society valuation rate has been cut by Rs274,500 or 32.8% to only Rs562,500 per marla (30 square yards).
In Shalimar Town, the rate for Gujjar Pura China Scheme has been lowered by Rs385,500 or 51.5% to only Rs363,000 per marla.
The residential property rate for the E-12 sector has been slashed by Rs2,491 or 14% to Rs15,309 per square yard whereas rates for Sector I-15 and I-16 have been cut by Rs8,160 or 54.4% and Rs5,434 or 36.2% respectively.
The FBR has also lowered valuation rates for posh residential areas in Rawalpindi by up to 57.2%. The DHA-I rate has been cut by 39% to Rs335,000 per marla – a relief of Rs215,000. The DHA-II rate has been cut by Rs150,000 or 37.5% to Rs255,000 per marla, DHA-II extension by Rs80,000 or 45.7% to Rs95,000 per marla, DHA-III by Rs60,000 or 40% to Rs90,000 and DHA-IV by Rs115,000 or 51.11% to Rs110,000.
The valuation rate for the Executive Meadows Phase-III of Bahria Town has been brought down by Rs330,000 or 55% to Rs270,000 per marla, for phase-I of Bahria Town the rate has been cut by Rs95,000 or 25.33% to Rs280,000 per marla and for Bahria Town Phase-I Extension it has been reduced by Rs210,000 or 56% to Rs165,000 per marla.
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The rate for Bahria Town phase-II has been lowered by Rs190,000 or 54.2% to Rs160,000, for phase-II extension by the highest 57.2% or Rs200,000 to Rs150,000 per marla. For most of the Bahria Town’s other phases from III to VIII, the per-marla rate has been cut in the range of 22.2% to 33.3%.
In Peshawar, only Hyderabad Town rate has been reduced by Rs395,310 or 42.3% to Rs540,000 per marla.
Published in The Express Tribune, January 12th, 2018.
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Original news : https://tribune.com.pk/story/1606348/2-policy-reversal-fbr-reduces-real-estate-valuations-big-cities/