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Property saga Lahore realtors jittery following FBR valuations

Property saga: Lahore realtors jittery following FBR valuations

LAHORE: Despite the apparent settlement between the real estate sector and the government, investor sentiment in the country’s property market remains jittery.

Concerns over the fresh valuation of land prices, which the Federal Board of Revenue notified on Tuesday, have enveloped agents in Lahore who are now concerned about their “bread and butter”. They say that FBR valuations, which are around 50% higher than the DC rates in Lahore, will result in a decline in investment.

The most sought out areas of Lahore, Defence Housing Authority, is likely to be affected the most. DHA phases VI, VII and IX are considered as investment hubs. The FBR has evaluated the values at Rs8.1 million, Rs6.4 million and Rs4.5 million per one kanal for these areas, respectively. The DC rates of these phases are Rs5.4 million, Rs4.2 million and Rs3 million correspondingly.

Similarly, Bahria town has also witnessed a sharp rise of almost Rs0.2 million in per marla price. The federal valuations are Rs9.1 million per kanal, whereas its DC rate stands at Rs5 million per kanal. FBR-determined valuation of per kanal price in Johar town stands at Rs9.4 million and Rs11.7 million, whereas its DC rate stands at Rs6 million per kanal.

All the prices are for residential properties. Values of commercial properties also increased at the above percentages.

“These evaluations are much more than our expectations given the fact that provincial land rates have been constantly revised in Lahore,” said Waseem Tariq, Chief executive Officer F-1 properties.

“We all are in a state of anxiety as no one knows what would be the future of the real estate market. The land evaluations as well as taxes have been increased massively, which will significantly raise the land transfer prices, leaving little room for investors and agents to earn bread and butter from the market,” he added.

Taxing measures

The market was previously taxed at the DC rates, however, in the federal budget 2016-17 the ratio of taxes has been increased. For instance, the ratio of withholding tax has been increased from 0.5% to 1% for tax filers and 1% to 2% for non -filers.

The ratio of advance taxes has also increased from 1% to 2% for filers and from 2% to 4% for non-filers. Previously, withholding tax was considered part of capital gain tax, but now different ratios of CGT have been introduced.

In addition provincial taxes are also applicable on every land transactions. Currently Punjab is charging 2% CVT and 3% stamp duty in shape of taxes.

In the case of tax filers, a property of one kanal in DHA phase VI, if transferred before July 2016, fetches the FBR a revenue of approximately Rs81,000. Provincial taxes come to Rs270,000 and other society transfer chargers come to around Rs0.1 million. In total, a single one kanal plot transaction costs approximately Rs0.45 million in taxes and fees.

However, after June 2016, the same property will now exchange hands for Rs0.61 million, excluding capital gains tax, which varies according to the year of transfer and profits gained on that property.

Courtesy : Express Tribune



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