KARACHI, 18 OCTOBER 2016: The property market is still reeling after the Finance Bill 2016 sent shockwaves through the sector. In July, the real estate market recorded a downturn in activity and price performance, but things look better in August.
The cost to transfer properties is set to increase by up to 200 percent as a consequence of the new property evaluation method.
Buyers have suffered a drop in confidence. Presently, a buyer needs to pay six percent in taxes for a property transfer if the property is worth Rs 4 million; which comprises a one percent corporation tax, two percent capital value tax (CVT), and a three percent stamp duty, not forgetting the registration fee of Rs1200.
“Sellers have been hit badly in the past few months,” said Saad Arshed—managing director of Lamudi Pakistan. “We have observed a slight reduction in online search queries as a result of the new tax rates,” said Arshed.
If your property costs more than Rs 3 million you can also expect to pay a withholding tax of four percent up from two percent and the government has imposed a capital gains tax on sellers.
“The third quarter is over, and we are now seeing the effects of the property tax amendment in full light. Buyers are hiding in the background, waiting for the market to bottom out, there is a lot of uncertainty, and there is a reduced number of transactions.” Arshed added.
A significant percentage of the real estate market in Pakistan was black money. Formerly, the property market was the perfect haven for holding black money, but the FBR now requires verification for the source of income and black money investors have been put off.
Adil Bhatti, a real estate agent from Islamabad with expertise in DHA market tells us “There is a transactional freeze in the market that is expected to linger for an uncertain period while property prices observe a relatively stable trend in DHA, Islamabad.”
Is the freefall coming to an end?
Data for August reveals that prices in the major housing schemes have levelled out. While Pakistani taxpayers are now required a pay a lot more tax, it has brought transparency to the market as most buyers are now genuine which makes the market less volatile in the long run. The real estate sector is changing, it is no longer a casino but a long term investment hotspot. High return on investment opportunities are available for purchases held for 3-5 years. Naturally, renting out houses is a sound investment vehicle with five percent rental yield per year. We may now be waving goodbye to the era of overnight price fluctuations.
Launched in 2013, Lamudi Pakistan is a global property portal focusing exclusively on emerging markets. The fast-growing platform is currently available in 13 countries in Asia, the Middle East and Latin America, with close to a million real estate listings across its global network. The leading real estate marketplace offers sellers, buyers, landlords and renters
a secure and easy-to-use platform to find or list properties online.
Communications Manager Lamudi Pakistan