LAHORE: Rising property taxes caused the real estate sector to stall in the first quarter of 2015, according to new analysis released by Lamudi Pakistan.
During Q1 of 2015, an increase was levied in the transfer fee, stamp duty, capital value tax (CVT), and withholding tax. Similarly a new corporation fee has also been added.
These policies hamper the activity of the real estate sector, with real estate agents now looking for other business opportunities as the sector has come to a standstill in the past quarter.
For instance, if a home owner wants to transfer his property, he has to pay a variety of taxes. The transfer charges vary from each housing society to the next, however there are some fixed transfer charges that have to be paid to the government.
The government says that the transfer charges are five percent of the DC rate, which is the minimum land value. The break-up of the transfer charges includes three percent tax on stamp papers, one percent is the newly-added corporation fee and two percent is the capital value tax.
A one percent advance withholding tax has also been levied since July 2014 on the purchase of both commercial and residential immovable properties having a DC rate, of more than PKR 3,000,000.
If the seller is a taxpayer then he have to pay 0.5 percent of the DC rate, and if he is not a taxpayer then he have to pay one percent of the DC rate. The buyer have to pay two percent of the DC rate. In the end these taxes adds up to around nine percent of the DC rate.
Saad Arshed, Country Director of Lamudi Pakistan, said: “The government needs to curb these taxes to give a boost to the real estate sector of Pakistan.
Currently, agents are very demoralised by the excessively high costs they incur on each property transaction, which was one of the key reasons for stalled real estate market activity in 2015. The government should revise these taxes in the upcoming 2015-16 budget to give a boost to this multi-million dollar sector of Pakistan.”
