June 04, 2006	Sunday	Jumadi-ul-Awwal 7, 1427

KARACHI, June 3: Rumours about levying of capital value tax (CVT) and some other taxes on property transactions in 2006-07 budget have led to a mild stir in the property market in district central, west and east in the last 10-15 days.

The real estate market in posh areas in district south remained normal ahead of the budget.

Many brokers say that the property transactions in the city except for posh areas have already slowed down for the last six to eight months as the rates have reached a level where speculators have taken a back seat as there is little hope for the prices to escalate any further in the short run.

Market is abuzz with reports that the government is planning to impose some kind of tax to curb speculative trading in property.

Brokers gave mixed reaction to likely imposition of CVT in the budget.

Mohammad Najeeb, owner of Nazimabad Estate in North Nazimabad, said that the CVT imposition had nothing to do with the decline in sale and purchase of plots. “Transactions have already been slowed down to 50 per cent for the last six-eight months as rates are out of range of genuine consumers,” he added.

A 200-yard single story house is priced at Rs6-7 million while 240-yard single story is tagged between Rs7.5-8.0 million and double storey is available at Rs12.5 million, he said.

A 400-yard bungalow (single storey) is priced over Rs10 million while double storey price ranges between Rs15-20 million. He added that market has only genuine buyers these days.

“If a person is buying a million-rupee-property than the CVT or other tax imposition hardly matters for him,” Najeeb said.

Abdaal Magray, a property dealer at Civic Associates in Gulshan-e-Iqbal, said that sale/purchase had been only 50 per cent these days as people were waiting for the budget. However, he claimed that the rates of bungalows had been pegged for the last six to eight months.

He said a single storey 240-yard house in Gulshan was priced at Rs9 million while double storey at Rs10 million. Even 120-yard single storey and double storey were priced at Rs5 million and Rs6-6.5 million. A 400-yard single storey tagged at Rs12.5 million while double storey at Rs15-20 million. “People are waiting for budget as well as price fall,” Abdaal said.

Gulistan-e-Jauhar has emerged as investors’ paradise in the last few years after Defence and Clifton.

Owner of Johar Associate in Block 1 Gulistan-e-Jauhar Abdul Wahab said that transactions in Johar area had declined by 30-40 per cent as compared to normal days because of three reasons — CVT fear, saturation point of the prices and shortage of new plots.

In case CVT was imposed it would reduce the sale and purchase of property besides causing reduction in prices. “Imposition of CVT is really not in the minds of filthy rich market players and equally the buyers in Johar area as they play in millions of rupees and feel no harm in paying a nominal fee in the shape of CVT,” he remarked.

He recalled that CVT had been imposed in Nawaz government and for some time the sale and purchase remained affected.

Mujahid Ali of Capital Associates at Gulistan-e-Jauhar Block 1 said that sale and purchase had slowed down slightly in the last 10-15 days as people were waiting for budget.

However, there had been no let-up in rates of property in Johar area. He said that a 240- yard plot in Block 2 was prices Rs5.5-6.0 million, a single storey house in Block 15 was tagged at Rs8-9 million while double storey 240-yard brand new house in the same block at over Rs10 million. A 400-yard bungalow was selling between Rs10-11.5 and double storey at Rs14-15 million.

Contrary to the other districts of the city, Khan Zubair Shaheen, owner of Pak Estate in Clifton Area, said that “there is no panic in the market about imposition of CVT and transactions are going normal these days.”

Besides, he added that in case it came into force it would be charged on bungalow transaction rather than on plots in DHA.

“I think the government will not impose any tax on property transactions due to unstable political and economic situations,” he observed.

He said prices of bungalows, plots and apartments had slightly increased in the last five to six months. However, the prices had doubled and tripled in the last few years.

A 500-yard plot in DHA phase VIII now sells between Rs8-15 million depending on the location as compared to Rs3 million in 2002. In Phase VII, 500-yard plot is priced between Rs18-21 million as against Rs6 million in 2002.

A 300-yard brand new bungalow in Phase 14 price hovers between Rs14-17 million as against Rs8 million in 2002. A 500-yard brand new bungalow in Phase V, VI and VII is available in the range of Rs26-31.5 million as compared to Rs11 million in 2002.

A 1,000-yard brand new bungalow in Phase V, VI and VII is being purchased at Rs40-60 million as compared to Rs15-20 million in 2002.

A two bedroom apartment in Clifton/Defence now carries price of Rs4.5 to Rs7 million as compared to Rs1.5-2.0 million. A three bedroom apartment sells between Rs5.5 to Rs9 million as against Rs2.8-3.3 million while a four bedroom apartment carries price at Rs8-13 million as against Rs3.5-4.0 million.

Zubair said that 20-25 deals of sale and purchase of plots in DHA was going on daily while 8-10 deals were being struck between buyers and sellers daily in the DHA office.

Clifton and Defence Real Estate Association president Malik Mohammad Arif said that reports indicate that CVT will be imposed at the rate of 10 per cent on seller, five per cent on buyer and 10 per cent on estate agent.

However, he said that the posh area market had not taken these reports seriously and sale and purchase were going on normal.

Contrary to what brokers claim, a source in Board of Revenue (BoR) said that there had been no impact of CVT rumours on the sale and purchase of plots and bungalows ahead of budget.

The source said that the Sindh government collected Rs2.979 billion stamp duty during July-April 2005-2006 as against Rs3.020 billion the same period of last fiscal. It also collected Rs486 million in registration fee during the period under review as against Rs515 million collected last year.

The source attributed the decline in the stamp duty collection to cut in rate to 3pc from 5pc and registration fee rate to 1pc from 1.5pc in the last few years.

Property prices in the city have shot up by over 200 per cent after 9/11 incidents as the flow of remittances from Pakistani expatriates had registered sharp increase filling the country’s reserves with dollars and other currencies.

Currently workers remittances stand at $3.6 billion which comes to 30 per cent out of total foreign exchange reserves of $12 billion. In 1999-2000, remittance stood at $98.3 million rising to $1.087 billion in 2000-2001.

Not only the rising remittances are blamed for swelling property prices, also stock market players, who had made huge profits in bourses in the last few years, have put up their money in real estate. Speculators and brokers are also responsible in pushing up the real estate prices at unaffordable levels.