End of income source amnesty & property investments in 2021-22

Income source amnesty scheme for property investments under section 111 and construction relief was part of the package given by the Government of Pakistan in 2020. The package which was called ordinance no-1 of 2020 and was further extended in Jan 2021 as under:

1. Builders and developers were allowed to purchase any land/plot for the purpose of construction without requiring to declare income source till 30th June 2021.
2. Builders and developers can enjoy fixed tax relief until 31st Dec 2021.
3. First purchasers of the building or unit of a building are also exempt from declaring their source of income up to 23rd March 2023.

Clause No 4 concerning most investors is as under:

Clause 4 – The provisions of section 111 shall also not apply.—

Clause 4 (a) the first purchaser of a building or a unit of the building purchased from the builder in respect of purchase price of the building or unit of the building subject to the following conditions, namely:-

      i. Full payment is made through a crossed banking instrument to the builder during a period starting from the date’ of registration of the           project with the Board under this section and ending on the 30thday of September 2022, in case the purchase is from a new project.

     ii. Full or balance amount of payment is made through a crossed banking instrument to the builder during a period starting from the date         of registration of the project with the Board under this section and ending on the 30thday of September 2022, in case the purchase is              from an existing incomplete project; and

Later on, in Jan 2021, an amendment was issued as under:

(d) in sub-section (4),—(I) in clause (a), for the expression “30th day of September 2022”, wherever occurring, the expression “31st day of
March 2023” shall be substituted.

What it means

1. The amnesty or exemption from section 111, to not declare the source of income is no more valid after 30th June 2021, if you wish to invest in plots and construct any building.
2. However, Amnesty from declaring the source of income is still valid if you want to purchase a building or a unit in a building (Apartment/shop, etc) in a project which is registered by FBR under this scheme if you meet the following two conditions:
   • You must pay the 100% amount to the builder against the unit/house/apartment/shop you want to purchase before 31st March 2023.
   • You must be the first buyer of the unit/house/apartment/shop and must purchase it directly from the developer.

Now that we know what it stands for let me answer some of the questions which may arise in your mind.

Is the honeymoon period of plots over?

Yes, the honeymoon period is over for plots, unless the amnesty is extended and even in that case it will not last more than the period of extension. However, that does not mean that the prices will come down. As there are a lot of other factors in play here such as lower transfer costs, lower capital gains taxes, higher dollar rate, market sentiment etc.

Whatever the case you will need to invest more smartly now and most certainly you will not see gains as high as we witnessed during June 2020- June 2021.

Should you sell files/plots or hold them?

While it is best to take profits and make an exit with a very high ROI, you can still hold them as I don’t see any market crash in near future. Similarly, I do not see very high gains as well except in certain areas. So even if the market grows by 10% from hereon, the uptrend cycle will ultimately come to an end if Government imposes some heavy taxes in 2022 or 2023.

Should I invest further in files/plots?

Yes, you can, just be smart to invest in areas where we have room for growth. Remember there were a lot of areas where real estate showed phenomenal growth even during the downtrend cycle of 2016 – 2020. It is just speculative trading which is going to be riskier now.

Where should you focus property investments for better gains?

The writing on the wall is now clear, the only place where you can invest without declaring your source of income is now in buildings or units such as apartments and shops in buildings such as Sixty6 Gulberg, Downtown Mall, Springs Gulberg which are registered with the FBR.

Gulberg Lahore presently has a CAGR (Compound Annual Growth Rate) of above 25% per annum as compared to 10% for the rest of Lahore. I am sure that with this amnesty on its side we can expect to see an ROI of more than 100% in the next 3 years in some of these projects in Gulberg Lahore.

Which building will give max returns?

There are a lot of factors to consider when you want to find the best building which is safe to invest in and offers the highest return on investment in the market. You will have to consider many factors, such as price, building design and layouts, the overall plan of the building, location, and even post-possession management. There are two ways to do it :

1. Do your complete research, spend months studying these buildings and making comparisons and then make a wild guess and invest.
2. Just give us a call at imlaak or book an appointment with me personally and we will guide you to make the best choice in the market.

Capt (Retd) Shahnawaz Yaqub Bhatti

UAN +92 3 111 777 555

WhatsApp & Mob +92 333 1616160