Budget, tax and real estate: what we know
The budget held some great initiatives, protections and opportunities for the real estate sector.
KARACHI (Web Desk) - Budgets hold immense importance but the importance the last budget announced by a certain political regime holds is unparalleled. It sets the precedent for the next elected government, decides the chances of re-election of the standing government and, of course, determines what the next year would be like for the public.
On 26th May Finance Minister Ishaq Dar announced this extremely imperative budget amidst many speculations and reservations and while many were unimpressed, the budget held some great initiatives, protections and opportunities for the real estate sector.
Budget 2017-2018, in terms of real estate, had an inclusive approach and what is meant by that statement is that the budget did not only cater to Pakistanis living in Pakistan but those abroad too, giving them opportunities to invest in real estate in Pakistan. Ishaq Dar, while announcing the budget, acknowledged both the importance and responsibility the Pakistani diaspora has towards the economy of Pakistan. One way the diaspora can contribute to the economy of the country is obviously through real estate, and to encourage expatriates to invest in Pakistan this year’s budget presented them with opportunities and safeguards. While the budget does not explicitly call for their investment in real estate, the diaspora is encouraged to invest and contribute in the development and infrastructure of the country. Having said that, the shift has not completely been shifted from real estate since an exclusive sector of the Capital Development Authority (CDA) is being dedicated to expatriates.
An increase in the cost of building will be seen in the coming year, which will obviously be a problem for those looking to build but the tax levied on builders and developers in the last budget has been lifted. This may offer a little compensation if not a lot to both parties.
The government is also willing to share in the risks of home financing, catering to low income households, guaranteeing a 40% credit for home financing. One home may be insured for PKR 10, 00,000. The three-tier system of the Capital Gains Tax (CGT) tax has been lifted, however a 15% increase for filers and 20% for non-filers has been announced.
The budget, however, is a proposal at this point in time and has not yet been approved which makes it difficult to make concrete judgments. The assumptions and trends made above will only stand true if the budget is approved. There are certain loopholes that are expected to be looked into and certain ambiguities regarding real estate that expected to be cleared, according to Zameen.com’s first quarter market report, the real estate sector is still recovering from the tax implications of last year’s budget and the government is expected to take this into account as well. No further speculations can be made till any development is seen in the approving of the budget.
