‘Black money in property market risks creating a bubble’

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ISLAMABAD: A huge amount of black money is being pumped into the property market which runs the risk of creating a real-estate bubble, a sub-committee of the National Assembly’s Standing Committee on Finance warned on Monday.

The sub-committee also decided to cross-check the claims made by property estate agents that the property sector was heading for a collapse due to the recent measures taken by the government.

“Just looking at the sector can reveal that the property business is facing a bubble for the last few years, and it is bound to burst sooner or later,” Syed Mustafa Mehmood of the Pakistan Peoples Party (PPP) said. “So it is better to inject the resistance rather than wait and see it burst.”

The sub-committee, chaired by Mian Abdul Mannan of PML-N, downplayed a report submitted by real estate agents from Karachi, Lahore and Faisalabad, and said that the sector was trying to mislead the authorities and portraying an incorrect picture that the sale and purchase of properties were on the decline.

The sub-committee has been formed to resolve the anomalies regarding the Federal Board of Revenue’s (FBR) valuation table on property tax.

The report — submitted by the Pakistan Real Estate Investment Forum (Perif) — highlighted that the property business has suffered after the government’s decision that the FBR would value the properties to impose taxes at the time of sale and purchase.

Perif President Shaban Elahi said investors have been reluctant to invest in certain areas due to drastic jump in taxations.

The areas identified were SITE Industrial Area, Port Qasim Authority Industrial Area, Landhi Industrial Area and DHA City in Karachi, Anmol Cooperative Society in Lahore, DHA Valley in Islamabad, and Kanal Road in Faisalabad.

The Perif members said it was a partial list and that they were facing business a slowdown across the country.

However, FBR officials present at the meeting rejected the notion that that the taxes were high. Giving an example, FBR member Rehmatullah Wazir said the average market value of a plot in DHA Phase 8 of Karachi was Rs50 million, but the taxes were filed at Rs900,000 only.

He said real-estate transactions have increased after this system of streamlining the sector has been introduced in the latest budget.

Mr Wazir, along with FBR spokesman Dr Muhammad Iqbal, highlighted that black money was being parked in properties and these investors were pushing the market value beyond the reach of common citizens. “Buying a house or residential land is already out of reach of an ordinary citizen. Something has to be done to bring this sector under control,” he added.

Meanwhile, Mr Mehmood of the PPP said that if there was a genuine demand than those who were buying land would not have left if unattended, they would have built a house. “We need to document the real estate sector and I think that a minor crash of prices will benefit the ordinary Pakistanis with white money,” he added.

Concluding the meeting, Mr Mannan said the real estate sector could not be compared with that of Dubai, where the real estate sector has become mature. “But I want to make it clear that we want to document this sector and this regime introduced in the budget 2016-17 is not a short-term measure. We will continue to streamline this sector,” he said.

Published in Dawn February 7th, 2017

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