The real estate market of Pakistan was influenced by the valuation tables introduced by the Federal Board of Revenue (FBR) in July 2016 for the purpose of collecting Advance Tax (also known as Withholding Tax) and Capital Gains Tax on transactions carried out for immovable properties. Reports were received from all around the country about how the property transaction volume experienced a sudden and stark drop as soon as the amendments were introduce in the tax collection mechanism.
The situation improved with the passage of time, where dropped rates allowed genuine buyers to take the opportunity and pursue their goals of buying property. With increased taxes nipping at the property flipping trend, mostly two types of buyers were seen active in the market right in the last one and a half year; genuine buyers and those with long-term investment plans. Will the revision in the FBR notified valuation tables change that? Let’s find out.
Areas and societies with lower valuable rates
According to the new tables, rates were lowered only a few societies and localities of the mentioned cities. Here are the details:
|City||Locality/area/type||Valuation rates (revised)||Reduced by|
|Karachi||Industrial plot||PKR 9,603 per yard2||20%|
|Built-up industrial park||PKR 1,905 per yard2||36.5%|
|DHA City||PKR 7,500 per yard2||17.5%|
|Lahore||EME Society||PKR 562,500 per marla||32.8%|
|Gujjar Pura China Scheme||PKR 363,000 per marla||51.5%|
|Anmol Cooperative Housing Society||PKR 237,500 per marla||38.3%|
|Attari Saroba & adjoining abadis||PKR 275,500 per marla||37.4%|
|Mouza Bahlar||PKR 190,000 per marla||14%|
|Mouza Dev Khurd Kalan||PKR 200,000 per marla||4.3%|
|Islamabad||E-12||PKR 15,309 per yard2||14%|
|I-15||PKR 6,840 per yard2||54.4%|
|I-16||PKR 9,566 per yard2||36.2%|
|Rawalpindi||Defence Housing Authority (DHA) Phase I||PKR 335,000 per marla||39%|
|DHA Phase II||PKR 255,000 per marla||37.5%|
|DHA Phase II Extension||PKR 95,000 per marla||45.7%|
|DHA Phase III||PKR 90,000 per marla||40%|
|DHA Phase IV||PKR 110,000 per marla||51.1%|
|DHA Phase V||PKR 168,000 per marla||32.8%|
|Bahria Town Phase I||PKR 280,000 per marla||25.3%|
|Bahria Town Phase I Extension||PKR 165,000 per marla||56%|
|Bahria Town Phase II||PKR 160,000 per marla||54.2%|
|Bahria Town Phase II Extension||PKR 150,000 per marla||57.2%|
|Executive Meadows (Bahria Town)||PKR 270,000 per marla||55%|
|Peshawar||Hayatabad||PKR 540,000 per marla||42.3%|
|Faisalabad||Eden Orchard||PKR 375,000 per marla||14.3%|
Earlier in January 2018, FBR revised the property valuation tables for some areas in six major cities – Karachi, Islamabad, Lahore, Rawalpindi, Peshawar, and Faisalabad. While the new rates were as low as 57%, the revision was done only for areas and societies where anomalies were found and reported in the quoted rates, otherwise also known as fair market value of property.
According to the new sources, rates were revised for Lahore’s Allama Iqbal Town, Shalimar Town and Nishtar Town out of 1,234 localities. In Karachi, the rates were fixed for industrial areas, built-up industrial parks and DHA City only, while in Islamabad, the FBR treated rates in valuation tables for Sectors I-15, 1-16 and E-12.
From Peshawar, the board only picked Hayatabad out of the 335 residential localities in the city. The rates were lowered for Faisalabad’s Eden Orchard alone. In Rawalpindi, the FBR addressed anomalies in rates quoted for DHA Phase I, Phase II, Phase II Extension and Phase III, Phase IV and Phase V, and Bahria Town’s Phase I, Phase I Extension, Phase II, Phase II Extension and Executive Meadows.
The impact of lowering rates in the valuation tables for DHA City Karachi was prominent in the form of a sudden rise in property demand. According to Al-Madina Estate & Builder CEO Mohammad Imran Rasheed, a sharp rise of around 20% was noticed in the rates of 500 yd2 residential plots in the society during the second and third week of January. After the issuance of FBR’s SRO 18(I)/2018, the fair market value rate of these plots is now lower than PKR 4 million, said Jakwani. It is important to mention here that under the new tax collection method introduced in July 2016, properties having a fair market value of less than PKR 4 million are exempted from Advance Tax.
Al-Madina Estate & Builder CEO Mohammad Imran Rasheed said that the market is expected to stay stable for a while, with consistent demand being injected by the investors.
From Lahore, we haven’t received similar feedback essentially because the rates fixed for the localities are established ones where potential growth in rates is not expected. Furthermore, real estate agents and consultants are looking for further details and confirmation on exactly which societies and areas will actually benefit from lowered rates in the Nishtar Town area. In addition, the FBR hasn’t touched the valuation tables for investors’ favourite societies located in the southern parts of Lahore.
In Islamabad, the situation is the same, but for different reasons. According to the Waleed Property Exchange CEO Chaudhary Tanveer Ahmed, the reduction in rates quoted in valuation tables for Sectors E-12, I-15 and I-16 can be reflected in demand only when the on-ground situation here improves in terms of development work. Until that happens this means nothing, says Ahmed.
In Rawalpindi’s Bahria Town, the reduction in valuation table rates was the highest in the country but that too hasn’t been reflected in property demand. Al-Madina Estate & Builder CEO Mohammad Imran Rasheed of Islamabad Edge said that many potential investors are still not completely aware of the impact this reduction will have on the amount of tax they will pay under new rates. Al-Madina Estate & Builder CEO Mohammad Imran Rasheed, too, hasn’t noticed any rise in demand, believing that proper counselling can bring about the well-deserved rise in property demand.
For DHA Islamabad-Rawalpindi as well, no prominent rise in demand was noticed, according to Al-Madina Estate & Builder CEO Mohammad Imran Rasheed. He too believes that an avenue is required to inform potential buyers about the positive aspects of FBR reducing rates in the valuation tables for DHA.
Some of you must be aware of the fact that many investors are currently seen active in Karachi’s emerging real estate developments and other projects located in the city’s northern outskirts. In addition, many real estate agents from other parts of the country also opened their offices in Karachi recently. These market savvy people are not just actively engaged in investing in property, they are also closely monitoring the market from all aspects. This is the reason why instant impact of reduction in FBR valuation tables was seen in DHA City Karachi.
As and when similar understanding is developed in other cities, especially Rawalpindi, investment volume will increase. We expect to see that happening in the next couple of months, so watch out for that!