FBR Land Valuation Prices Revision | Market Analysis
FBR Land Valuation Prices Revision | Market Analysis
In December FBR Land Valuation table for property prices by FBR was revised. The new prices in the FBR land valuation table were a far cry from the ground reality. For example, 1 Kanal plot in 9 prism was unfairly valued at 37500000 ( 3 crore seventy five lacs), this is a highly exaggerated valuation of plot as from the data we have the price of plots vary from 1 crore fifty lacs to 3 crore fifty lacs and the vast majority of plots are around 2 crores to 2.5 crores.
A similar increase in valuation could be seen in all other phases of DHA Lahore as well. The new valuation table had revision written all over it and after protests by the stakeholders including real estate associations it was finally withdrawn. The following letter was issued by the FBR authorities to revisit the valuation tables :
How FBR valuations impact real estate
FBR valuation table for immovable properties has two major impacts on real estate transactions:
- While buying a property a purchaser must declare the amount equal to the FBR value of the property as white.
- Both buyer and seller pay 1% withholding tax as per the FBR value of the property.
This means that any increase in FBR values will directly increase the cost of transactions. And Decrease the involvement of black money in real estate. This is exactly what the Government wants As well, to increase tax collection and squeeze the involvement of black money in real estate.
What happens now?
New SRO will be released on 16th January, And till then the old FBR values will remain intact. The intention of FBR is clear from the letter clause 2, sub-clause iii where it states that SBP approved evaluators and stakeholders will be taken on board for a consultation to reach new valuations which may be lower or higher than the lately notified valuations.
Let us now consider possible scenarios and their expected outcome:
- Valuations revised by 30% or less will have minimal effect on real estate prices and the market will generally respond in a positive manner. Such a revision will give ample breathing space for the undeclared money in real estate and will be received positively by all stakeholders. The market will remain stable and will continue its natural trends.
- If valuations are revised between 30 to 60% we may see the first signs of negativity by the market not due to taxes but due to an increase in the declaration of white money. A correction may follow but it will not be a huge upset and hopefully real estate market will be able to bear the blunt with a 10 to 20% correction in prices in the coming months.
- If valuations are revised by more than 60% we will see a bigger correction and the market will come to a halt. Considering that the market has already risen by more than a 100% in the last two years a 25 to 40% decline may be on the cards.
What to do?
We are in unchartered territory till the new FBR land valuations are released on the 16th of January 2022. Real estate has already risen quite a bit in last years so if you are in good profits it may well be better to take an exit. Additionally, as it seems most people are going to go for the wait and watch policy, that may give you an easy exit before the crises hit the market.
However, the crises may never happen if the valuations are revised under 30%, and also not all areas will be affected by it. So I leave it to your better judgment and until then let us wait and watch like everyone else.
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Captain (Retd) Shahnawaz Yaqub Bhatti
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