A National Assembly committee has expressed the apprehensions that a huge amount of black money is being injected into the property market and possibility of another real estate bubble cannot be ruled out. It happened in Lahore a decade ago when prices of lands were disproportionately increased but soon the bubble burst and recession griped the real estate sector for the coming years. The sector is allegedly in trouble since the current government introduced withholding tax on sale and purchase of land as well as binding the buyers to reveal their sources of income. Earlier, the real estate agents from major cities of the country, including Lahore and Karachi,portrayed very grim picture of the property sector following the imposition of withholding tax. According to a report issued by Real Estate Investment Forum, the real estate business suffered after the government involved the Federal Board of Revenue to evaluate the property prices to calculate the amount of taxes during sale and purchase. The government decision backfired in practical terms as the investors, including those having black money, preferred to invest in Dubai and Kuala Lumpur. In Dubai, Pakistani investors are among the top countries, including Britain and Saudi Arabia, who heavily invested in the property market. Imposition of taxes at home has sharply pulled down the investment graph in the sector. As a natter if fact at least 42 industries are directly and 40 are indirectly associated with the business.
Finance Minister Ishaq Dar is proud of his tax measures, saying there is a huge collection of revenues under the head of the withholding tax. There is no doubt he is true to his words, but the industries which were associated with the real estate sector had started incurring losses. Recession in the industry means low tax collections. Mr Dar has implemented a right decision at a wrong time. Now the National Assembly committee is ready to assess the report to ascertain the claims made by property dealers that the property sector was heading toward a collapse. A major portion of the economy of Pakistan is undocumented and some of the businessmen are habitual tax evaders, but the matter needs a careful handling. The writ of the government is already weak and forcible implementation of the executive orders can create troubles not only for the business community but also for the officials concerned. Pakistan’s investment in Dubai was recorded at $2.1 billion in 2015, but reduced to $1.2 billion in 2016. However, if the investors are pushed to the wall for any reason, they have no choice but to shift their capital to the destination of their choice.
The government will have to find a way out not only to bring every sector of the economy into the official record, but the investors should also be encouraged to invest in local market.
