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Sufiyan Mahm..
( 111 posts )

[3 Answers]
We have a great need for imposing property tax on vacant plots in pakistan. The housing crises in the country is one that we can't deny. And one way to remedy this issue is with vacant land tax.

Imposition of property taxes on vacant plots will boost construction as pointed out by the pakistan businessmen and intellectuals forum (pbif) recently.

However, the other side of this story is to actually ease taxes for builders working to develop the housing sector. Also, the problem arises that property taxes on vacant plots will be burdensome for genuine buyers. These buyers buy plots by saving money over years and then need the same amount of money and time to construct a house. So charging them vacant property tax seems unfair.

I believe punjab imposed vacant property tax in 2016. Is this tax on vacant plots in the province still applicable? And what do the experts think on how to regulate this matter so that genuine buyers can still benefit and investors can help towards development of pakistan's real estate sector?

    319 days ago In General Advice
    Post Reply
    Imtiaz
    (2034 posts)
    Sir, I am not sure if that works or is justifiable by any means (at least in countries like PAK) where Taxes in ratio to net income are already skyrocketed.



    - There is already Tax/Transfer fees as per DC rate on each single transaction and no real estate transaction can escape that.



    - Tax only applies when profits made. So if the price of the plot drops, will Govt right off or compensate the tax payer?



    - Your point very well explains the situation that years of saving to buy first and than years of saving again to construct.



    The possible solution can be 'Development/Value Addition Tax', i.e.,



    - Govt. Develops the land, provides all ameneties to add value and charges VAT let's says yearly. But VAT also applies at time of transaction not while holding the asset.



    I seriously believe it's the upper end of the chain (big developers) that need to brought into proper tax. You can see how mega developers (without naming any) are being kissed on their feet to surrender state land in front of them.



    Tax is paid on vacant plot but what if let's says CDA gives you a possession plot but makes you wait for a decade+ to provide any basic ameneties to even proceed with construction. No body would like to convert their yard earned money into concrete in the middle of no where



    Consumer end is paying due tax, it's the big developers that exploit and state is too spineless to do anything!
      318 days ago 

      Sufiyan Mahm..
      (111 posts)
      I appreciate your answer and quite logical opinion. It seems like mega developers are enjoying a lot of freedom to launch projects over projects. And these projects are most of time in hot waters with the authorities. Although i mentioned that we need a balance where genuine buyers truly benefit and investors can play their due role. So i think the vacant property tax should only apply where the projects have actually provided the required facilities and not just possession. However, your proposition for stricter actions against big developers definitely needs attention. But then it comes back to fact that not everyone is on the same page here.
        317 days ago 

        Imtiaz
        (2034 posts)
        My original post has actually being stripped or deleted. Your views do make sense. I would add from my deleted post.

        - Tax is against transaction/service/product. When that product is bought/sold there is due tax and more.

        Moving towards solutions to increase state revenue/accelerated constructions

        - Stock Market Model of Real Estate where Real Estate Developers can formally register like SECP in case of stocks. On ground plots/properties can be floated in terms of shares. Multiple people can be shareholders of same land, unit resulting in frequent transactions and ultimately more justified tax on frequent buying/selling.

        - Pre-fabricated Units: Ones that can be assembled quickly, they for sure bring down costs (e.g., Awami Villas in Phase 8). They are economical, eco-friendly to say the least.

        - Ensure that developer donot sell depressed land for residential construction and reserves that depressed land for parks, etc. This also bring down cost to some extent.

        - Home Financing: On more friendly terms not with exploitation like right now by banks.

        - Ensure developers to sell 25% of their project as constructed units with better offers to end buyers.

        Of-course there could be many more points to add here


        Even in developed projects, overseas due to their non availability or people with lack of funds will suffer, unjustifiably. In EU the concept of just land is rare and developer sells constructed units but the sector is regulated, banks are friendly and people are financially strong.
          317 days ago 

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