Increased Property Taxes are not acceptable

Increased Property Taxes are not acceptable #IshaqDar

In the budget of 2016-17 Mr, Ishaq Dar the present finance minister of Pakistan announced increased property taxes in the real estate sector. The justification given by Mr, Ishaq Dar for levying heavy taxes on real estate is to push investors to put their money in other productive areas and industries to create more employment opportunities. Makes sense right? yeah lets crack down on the 2nd biggest sector offering employment only second to agriculture.

 Someone needs to tell Mr Ishaq Dar that:

Real estate market is crucial for promoting commerce and industry, growth, employment, and poverty reduction. Increased business opportunities in Pakistan and migration of the labor force to cities has led to an increase in the demand for both commercial and residential real estate. Demand for real estate is driven by population growth, personal income, employment rates, interest rates, and access to capital.

Real estate forms the backbone of the modern economy being considered a secure fixed asset market. Efficient Real Estate market is most important for a well-functioning modern economy. An efficient Real Estate market is one that encourages quick development and transaction of land, provides reasonable access to all income groups, environmentally sound and the system governing the land markets should be integrated with other laws and regulations governing land, such as planning, taxation and provision of public infrastructure and services. According to the World Bank, in most countries, real estate (including land) accounts for between half and three-quarters of national wealth.

Real estate consists of industrial and service sector.

Including Construction, large infrastructural projects such as roads, bridges etc. Brokerage Services, Property consultants, dealers, property managers, etc.Financial Services; mortgage banks, real estate investment trusts (REITs).Operations; architects, urban planners, etc.The labor sector.Cement and brick manufacturing industries.Utility sector.Household appliances.Furniture industries.

About 250 ancillary industries, are dependent on the real estate industry. Real estate is perhaps the only sector which brings all these diverse factors together, and is, therefore, critical for the overall health of the nation, as it impacts the entire economy. As for employment Real Estate is the second largest employer next only to agriculture.

Foreign Direct Investments (FDI)

The growing real estate sector in Pakistan has attracted an estimated 6 Billion USD as foreign direct investment in the fiscal year 2015-16. A slump in real estate sector will surely effect the FDI coming into Pakistan negatively.

All of this makes me wonder what kind of industrial revolution Mr, Ishaq Dar foresees in return. As a real estate consultant more than 95% of investors in real estate are industrialists, business owners, Ex patriates and those on payroll both serving and retired. The only intention of these people to invest in real estate sector is to secure the extra money and their savings by investing in a secure fixed asset. Only 5 percent of the investors are fixed to real estate as traders and developers and act as a bridge between real estate and the remaining 95% of investors.

Is it a Crack Down On Black Money?

This is not a crackdown on the black money circulating in the real estate market. If it is than why there is no relief for the tax filer? Why no relief for the Foreign direct investment? I believe Mr, Ishaq Dar took Iqbal’s “Aik hi Suff mai kharay ho gayay Mahmood-o-Ayaz” literally for a tax filer and non-tax filer with black money. As a patriot I would stand by Mr, Ishaq Dar to take action against those who don’t pay taxes but I won’t when he wishes to create jobs by eliminating the ones which already exist or when he wants to crack down on real estate in Pakistan in the garb of black money investors.

With all due respect Mr, Ishaq Dar if the real estate market crumbles. There will be far more jobless people on the road than the new jobs created. The industrialist and business owner will just move to real estate markets like Dubai which offer hardly any taxation to attract FDI. While Pakistan is ready to sacrifice the hard earned FDI we receive every year for real estate sector, someone else may just cash the opportunity. Humbly we all do know that you have no interests in Dubai real estate and you have got nothing to do with your son’s real estate empire in Dubai.

For details about increased property taxes proposed in Budget 2016-17 click here

Captain (Retd) Shahnawaz Yaqub Bhatti

Investment Consultant and CEO at Imlaak

Mob : +92 333 1717170 ( Whatsapp)

Skype : Shahnawaz.yaqub