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New property tax system is blessing for genuine buyers

Posted by master on September 24, 2016
| Tax
| 0

Pakistan new Property Tax evaluation system 2016

In Pakistan, taxes on real estate transactions are applied according to DC rates which are much lower

than the original market prices of properties. The government of Pakistan has changed this

procedure in 2016. According to the new procedure starting 1st July 2016, property taxes will be

collected not according to the DC rates but according to the current values of properties. For this

State Bank of Pakistan has issued the list of regional real estate price evaluation members, who will

evaluate the current prices of real estate in different areas / regions.

Major reasons of the government’s decision to change property tax evaluation system in Pakistan

People should invest in job creating businesses

Firstly, real estate investment is not a genuine investment as it adds no real value to the economy,

but rather restricts genuine businesses from working by making it significantly more expensive to

lease business spaces. People should be encouraged to invest in more job creating businesses as it

will lead to economic growth in Pakistan.

Free circulation of black money will be checked

Secondly, real estate sector is mainly a tool for hoarding black money and averting capital gain and

wealth taxes, with the lucrative return. FBR and government wants to stop black money circulation

in Pakistan. By new property tax evaluation system in Pakistan, black money circulation will be much


House prices will become more affordable

Thirdly, the normal / affordable real estate prices will be a blessing for genuine home buyers &

businessmen, other than the fake investors who hoard up land / property and are major cause of sky

high property prices in Pakistan. The new property tax evaluation system will be a great tool by the

government to bring house price to much affordable level, which will solve the housing crisis in


It will end land price compensation disputes in Pakistan

Fourthly, during the construction of Orange Line Metro Train Lahore, people held huge protests to

demand market rates for their land and properties affected by train route. Eventually, the

government paid the affected people according to market rates. To end the disputes forever in

Pakistan, the government wants to receive taxes and to pay compensations according to the market


Effects of New property tax evaluation system on real estate sector

There are both positive and negative effects on real estate sector due to recent changes in property

tax evaluation system:-

Negative effects of new property tax evaluation system

On negative side, real estate sector will see massive decline due to reduced transactions. According

to one real estate expert of DHA Lahore, file transfer has declined in DHA since July 1, 2016. Before

new evaluation system, on average 100 files were transferred in DHA Lahore on daily basis. Day

trading will be affected by new tax formula and realtors / real estate agents will see massive declines

in their businesses.

Positive effects of new property tax evaluation system

On positive side, speculation will end in real estate sector which is the major cause of abnormally

high property prices in Pakistan. We will see 50% price crash in many areas, especially where empty

plots are in abundance. This will ultimately bring the house price in Pakistan to much affordable

level. The people who want to buy properties for living, will find plots and houses at much affordable


Genuine home buyers are the real beneficiaries of new tax evaluation system

As discusses above, new evaluation system will reduce the day trading and speculation in real estate

sector. Investors will get their money out of the property market and we will see reduced and much

affordable prices. This will benefit the genuine home buyers, especially the first time buyers. High

home price is the major cause of homelessness and declining home ownership in Pakistan. New

evaluation system will provide the most desired relief for genuine home buyers and home

ownership will increase in Pakistan.

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