KARACHI, July 27: The Sindh government lost Rs360 million in revenue during the 2006-07 as the registration of property sale deeds plunged by 10,649 over the previous year. The provincial government charges one per cent fee on registration of property documents.

Experts feel that this does not necessarily mean that there is an actual drop in the level of activity in the real estate sector. They argue that surging prices have driven a huge segment of middle class population out of the market but there are still enough people with effective demand to keep the property market active.

A fall in property transactions, according to them, mean that either the registration apparatus has weakened or the legal framework allows loopholes for the people to bypass the system.

According to the figures released by the Registration Wing of the Sindh Board of Revenue about 250,761 property sale deeds were registered during 2006-07 against 261,430 documents registered in 2005-06.

The loss was mainly attributed to the condition laid down by the Karachi Building Control Authority (KBCA) that no property sale deed should be registered without an occupancy certificate obtained by the owner.

The other reason for the revenue loss was two per cent CVT levied by the Federal Board of Revenue on property transactions in the last budget.

According to the figures the total revenue generated from registration of sale deeds in 2006-07 was Rs340.55 million against Rs705.74 million fetched during 2005-06.

Rasool Bux Narejo, who has recently taken charge of Inspector General of Registration Sindh Board of Revenue, told Dawn that owing to these two factors the number of registration of property transactions plummeted sharply.

He said that sale and purchase of property had not stopped but the transactions were now being carried out on power of attorney causing revenue loss to the provincial kitty.

The property deals concluded on power of attorneys always face risk of cancellation and may lead to litigation among the parties concerned.

He further said that the levy of two per cent CVT in addition to one fee charged by the municipal towns had also curtailed revenue generation from registration of property transactions.

Mr Narejo lamented that the Sindh government had reduced stamp duty on registration of documents from seven per cent to three per cent a couple of years back to encourage registration of sale deeds, but the levy of CVT and municipal tax had defeated the purpose.

He further said that this had also discouraged listing of property deals because the cost of transaction had increased substantially.

The registration department was considering taking up the issue with the ministry of law to find out a solution to the problem so that revenue loss could be avoided.

Meanwhile, a delegation of Association of Builders and Developers (Abad) held meeting recently with Mr Narejo and apprised him of problems being faced by their members in registering property deals due to the KBCA prohibition.

Sources in the association told Dawn that the KBCA was punishing owner of houses and flats for their own negligence and incompetence in checking violation of building rules while they were under construction.

“Once the buildings are ready and occupied by the owners KBCA gets alert about the violation of the building plan,” the sources added.