KARACHI, June 5: Market analysts and real estate dealers on Monday gave a mixed reaction over the levy of two per cent capital value tax (CVT) on the value of land measuring 500 yards. Some said sale and purchase as well as prices would fall slightly while others maintained that it would hardly make any impact on transaction and rates.
They say much depends on the valuation table of various categories of plots and bungalows prepared by the provincial governments that vary from area to area on which stamp duty is currently being charged. There are also reports that the city government will also come up with some kind of tax on the property transaction. In case the provincial governments increase stamp duty and the city government imposes additional tax then it may cause a stir in the property transactions.
Mohammad Sohail, research head at Jehangir Siddqui Research, said prices of plots/bungalows might decline by two to five per cent which he termed a technical correction in skyrocketing rates. He said the tempo of sale and purchase might also break up.
However, he did not see any big impact on the real estate market in terms of prices in future. For example, Mr Sohail said, if a plot was priced at Rs10 million its official rate of valuation, as per the Board of Revenue (BoR) slabs, comes to Rs1 million. On this Rs1 million the CVT amount will be charged at Rs20,000.
He termed the overall budget a political, expansionary and public friendly rather than investment and export oriented.
Abdul Wahab Parekh, owner of Parekh Estate at Clifton, said the Board of Revenue had made categories of plots and bungalows on which stamp duty was charged at three per cent on per square yard. On an open plot of 1,000 yards, the official valuation price comes to Rs4,500 per square yard which means that the duty or any tax will be charged at Rs4.5 million irrespective of its market price.
Keeping in view of Rs4.5 million the CVT amount comes to Rs90,000 for a 1,000-yard plot on the schedule rate of BoR of Rs4,500 per square yard. The stamp duty comes to Rs135,000 and registration fee is charged at Rs45,000.
“If an investor was paying Rs180,000 in terms of stamp duty and registration fee for million of rupees property then he will not bother about paying a few thousands as CVT,” he said, adding that the main aim of the government was to bring the buyer and seller into the tax net.
Mr Parekh ruled out the possibility of decline in sale/purchase and property prices because of the CVT imposition. “Much depends on the supply and demand position of plots and bungalows in future.”
Mohamamd Najeeb, owner of Nazimabad Estate, said the valuation rate of collecting stamp duty on a 500-yard single-storey bungalow in North Nazimabad, falling in Category 1, is Rs4,500 per square yard and Rs3,500 per square yard for an open plot.
The imposition of two per cent CVT will come to Rs45,000 on a 500-yard single-storey bungalow, while stamp duty and registration fee come to Rs67,500 and Rs22,500, respectively.
He said CVT would neither hamper the sale and purchase of property or it would result in a decline in property rates. “Much depends on the upward revision of valuation rate of property by the provincial government.”
