Pakistan is currently on the verge of introducing a new amnesty for property transactions, which could have far-reaching implications for the real estate and construction sectors. Under this proposed legislation, buyers may be exempt from the stringent requirement of disclosing their income sources when purchasing property, a move that aims to revive the country’s real estate market amid a prolonged slowdown.
The proposal, which is part of “The Tax Laws (Amendment) Bill, 2024,” has sparked intense discussions among key industry stakeholders, including property developers, real estate agents, and construction companies. These groups have formally appealed to the National Assembly Standing Committee on Finance and Revenue to reconsider certain aspects of the bill, particularly the clause that demands buyers justify their financial sources for property transactions exceeding Rs 50 million.
The current draft of the legislation specifies that individuals can only acquire property worth more than 130% of their declared liquid assets from previous tax filings. If a property purchase surpasses this threshold, buyers will be required to verify their income sources to continue the transaction. While this regulation is intended to prevent money laundering and ensure transparency, industry experts believe it could unintentionally stifle investment in the sector.
Leading voices within the real estate industry argue that such restrictions could further dampen activity in a market already grappling with sluggish growth. They emphasize the need for a temporary exemption on property transactions up to Rs 50 million, which would allow buyers to engage in the market without the burden of disclosing the source of their income. This move, they suggest, could unlock capital that is currently sitting idle and revitalize the market by encouraging formal property registrations.
In response to these concerns, the Finance Sub-Committee of the National Assembly, chaired by Bilal Azhar Kayani, has been tasked with evaluating a possible exemption threshold for property transactions. While a meeting was originally scheduled for last Friday at the Federal Board of Revenue (FBR) Headquarters, it was postponed due to logistical issues. The meeting is now expected to take place next week, where the committee will discuss the details of the proposed exemption.
The discussion has already garnered significant attention from high-profile figures in the real estate industry. Arif Habib, the chairman of Arif Habib Dolmen REIT Management Limited (AHDRML), and representatives from the Association of Builders and Developers of Pakistan (ABAD) have actively engaged in the dialogue. In a previous session, Dr. Najeeb Memon, FBR’s Member of Policy, shared that the board had considered a lower threshold of Rs 10 million for property purchases without requiring an income source declaration. However, no final decisions have been made.
Industry experts have raised alarms about the potential negative impact of the proposed bill on Pakistan’s economy, particularly given that the real estate sector plays a crucial role in both the national GDP and tax revenue collection. Currently, the industry is burdened with a taxation rate that exceeds 115%, and additional regulatory constraints could further suppress investment. There is growing concern that overregulation could push investors to explore more tax-friendly markets abroad, such as Dubai, which would lead to capital flight and further hamper the local economy.
In light of these concerns, real estate representatives are advocating for a more balanced approach to regulation. They suggest that instead of imposing strict preemptive measures, tax authorities should verify information during property registration processes. This would ensure compliance without deterring investment. Furthermore, industry leaders have urged the government to provide incentives for corporate developers, thereby fostering investment in the formal real estate sector.
As discussions continue, there is cautious optimism that policymakers will strike a balance between the need for regulation and the necessity of stimulating economic growth. A well-calibrated approach could safeguard Pakistan’s real estate sector while ensuring its continued contribution to the broader economy. By crafting policies that encourage investment while maintaining transparency, Pakistan’s government can help sustain momentum in the real estate market, ensuring that it remains an attractive and viable investment option for years to come.