REAL estate developers have complained of discrimination between the foreign and local investors by the present government that has offered lucrative incentives to foreign (UAE) builders while taxing the property transactions at home with two per cent CVT.
They claimed that the real estate sector could earn more foreign exchange for the country than the privatisation proceeds provided the former is given reasonable incentives. The builders said the present government’s policies, including consumer financing, have contributed to property boom.
A leading real estate developer said that the policies of the present government, such as abolishment of the capital gain tax, wealth tax and fixing a flat rate of five per cent on rental income were conducive to development of real estate business.
He said the 9/11 episode and the government policies led to the greater inflow of remittances, which had a good impact on property business. Sensing hostile environment overseas Pakistanis are buying houses.
To a query, a developer said that the privatisation of large industrial units, like Pakistan Steel, would also help in the development of real estates as the excess land attached to the plant would be used for building residential or commercial blocks.
He dismissed the theory that the boost in property rates had affected the poor and middle class. He said that people from these classes could benefit from housing loans.
He disclosed that there was a move to set up Real Estate Investment Trust (REIT) in the country which will issue an index on real estates for the benefit of foreign investors.
Chairman, Association of Builders and Developers, Hafeez-ur-Rehman Butt, said that privatisation, deregulation and liberalisation are order of the day and contributed well to the development of countries around the world.
These policies should continue after the 2007 elections.
About abnormal surge in prices of apartments and houses, he said that the builders had to pay millions of rupees as development charges for a small housing project for 200 families. They have to bear the entire cost of infrastructure needed to deliver utilities at the project site in contrast with other countries where utilities are provided at the doorstep without any extra charge.
Mr Butt suggested a strong regulatory network to safeguard the interests of the people in the event of widespread privatisation and deregulation. In builders’ case, he said the Building Control Authority fixed price of a flat or a house after taking into account the type of construction and location of the project.
He said that in the open market era, the government could not control prices but could play the role of a facilitator by arranging long-term financing on cheaper rates to help people buy a house.
Mr. Butt disclosed that the International Finance Corporation has shown keen interest in the development of housing in Pakistan and is considering transferring their unutilised funds lying in other countries to Pakistan.
To a query, he said that average price of a 3-bedroom flat in Gulistan Jauhar is Rs3.2 million with Rs1.5m loan from the HBFC.
President, United Defence Clifton Estate Agents Association, Raja Mazhar, flayed the government move to impose two per CVT on all property transactions which, he said, had stemmed the growth of real estate sector in the country.
He complained that the government did not consult the association before levying the tax, otherwise a system to generate revenue could have been evolved.
Mr. Mazhar said a lot of real estate developers had shifted to the UAE due to tax on property dealings and lack of incentives from the government. Another factor impeding the real estate development is law and order situation in the country. Another setback to the real estate sector is the banks refusal to finance purchase of plots which earlier got up to 60-70 per cent financing.
He said that property transactions in Defence and Clifton had declined after the June 2006 budget and prices have also come down by 20 per cent.
He sees no harm in continuation of the present economic policies after the 2007 elections provided a five-year tax holiday is granted to the real estate sector.
