The United Arab Emirates sold property worth $6.81 to foreign buyers during the first five months of the current year and Pakistanis are among the top five nationals who heavily invested in the Dubai property market. On another note, the new rules of the State Bank have allegedly made the real estate business dead in Pakistan. The dust of offshore companies has not yet subsided when the country’s investors are pushed to find other options to save their money. The country receives $17 billion remittances per year and major share of this money is invested in real estate business. However, experts now fear that tough rules will divert the flow of remittances to Dubai, Malaysia and to some other island nations.
The corrupt elements are already buying property in Britain’s posh localities while the overseas Pakistanis who want to buy property in Pakistan with their hard earned money are discouraged to investment in their home country. Apparently, the tax authorities have no mechanism to recognize the overseas Pakistanis and this has thrown the robust real estate and property business into recession. According to real estate dealers, the new State Bank designated valuers assesses the monetary worth of possessions on the market rate base instead of the deputy commissioners rate. Hence, the transfers of plots have virtually stopped in Lahore, Karachi and Islamabad since the start of the new fiscal year.
At least 100 deals used to be signed daily in Lahore alone before the rules were implemented. The ratio have now fallen to one or two deals. No one wants to get himself involved in any government agency in the country and buying a property means getting involved in duties and taxes. Experts believe if this state of affairs continues, it will not only decrease the government revenue, but will also cause capital flight to the Dubai real estate market. It is unfortunate that policymakers in Pakistan always forget one basic point of the market economy– that is — more are the taxes, lower will be investment and less are the taxes, more will be the business, trade and investment.
However, in a quest for more collections, the government stops not only the flow of local and foreign investment, but also encourages capital flight. The Pakistani policymakers should learn from Dubai, Singapore and Malaysia where maximum facilities are provided to the investors. When the local investors will be discouraged to put their money in business, how the government expects to attract the foreign investors. The government agencies are thumping their chests on the collection of revenues, but forget how much they have lost business, investment and trade opportunities in the country.
