The announcement of the 2016 budget pushed the real estate market of Pakistan into gloom since it was accompanied by a new property tax intended to bring black money into the tax-net. The heightened enthusiasm generated by the country’s property market in the two years preceding the 2016 budget was cut short by the new property tax which dampened the spirits of investors, property developers and real estate agents. Nevertheless, the property sector in Pakistan still managed to draw investor interest in 2016, in spite of the prevailing market cooldown. And then the holding of a successful property expo in Karachi set a positive tone for the property market in 2017.
New Property Tax 2016 And Its Impact
In its initial form, the new property tax was primarily aimed at documenting property transactions at fair prices. The official intention behind this move was to generate revenue and mainly to bring black money floating in Pakistan’s real estate sector into the tax net.
As it happens, in most cases, this particular government proposal faced strong resistance from stakeholders. The government then tabled another proposal which was based on FBR’s notified valuation tables by sidelining the table based on valuation of individual properties.
The government proposal failed to garner investor confidence due to which the real estate market of Pakistan saw a decline in business transactions for the second half of 2016.
Reasons For Downslide In The Real Estate Sector
The 2016 property crisis did not happen because of a real estate bubble. Actually, the crisis hit hard because of ill-conceived policy of the federal government. The entire property tax proposal was shrouded in the garb of mystery as uncertainty ruled the roost in the real estate circles of Pakistan.
Before the 2016 budget was announced, the two years before that had been significantly important for Pakistan during which the government and the army were faced with the daunting task of improving the law and order situation in the country. And as things turned out, the law and order situation improved significantly, work on CPEC-related infrastructure development also picked speed and the economy also showed positive signs of doing well. Under these circumstances the real estate market also saw a rise in business activities and the outlook was generally positive. Property business in Karachi also did quite well during this time as calm returned to the port city after years of violence.
The sentiment, however, quickly changed after the introduction of the new property tax by the government. As investors pulled out their money from the property sector, the real estate sector of Pakistan went into a lull.
Every Cloud Has A Silver Lining
The fiasco witnessed in the real estate market in 2016 did not entirely generate bad news. In fact, the market slowdown had a silver lining. Since the property market was witnessing a rapid increase in business activity, there remained a risk of the creation of another real estate bubble. The new property tax unwittingly did not allow that to happen and instead proved to be rude awakening for the real estate sector which urgently needed a strong strategy to sustain business.
The sentiment in the real estate market of Pakistan in 2017 has taken a turn for the better, which can be gauged from the successful holding of property expos in Karachi, Lahore and Islamabad recently. Pakistan-based online property portal Zameen.com recently held a property expo in Karachi which attracted around 80,000 people, a whooping number considering the fact that the property market has slowed down considerably.
But that is not all. According to the annual market report 2016 released by Zameen.com, the real estate sector of Karachi performed quite well as compared to the capital city of Islamabad. Average prices of 500 square yard and 250 square yard plots in DHA City rose 21.35 percent and 11.31 percent respectively in 2016. In addition, Bahria Town registered a 7.69 percent increase in prices in the 500 square yard category.
The positivity observed in Karachi’s property market at the moment is expected to spread to other urban centres of Pakistan during the ongoing year. Until then, we can only hope for the better.