Aoa members
Will the proposed construction sector package be able to boost the real estate business in Pakistan?
Good/healthy decision taken by PM IK for revival of Pak economic conditions through real estate sector which is so good in current scenario.
Well, in my humble opinion, Prime Minister (PM) Imran Khan’s decision to announce a construction sector package is going to prove to be the best thing for Pakistan’s real estate sector.
The details of the incentive package are as follows:
• The sources of income of anybody who chooses to invest in the construction sector in 2020 will not be investigated by the government (people associated with real estate have been demanding something of this sort ever since the coronavirus issue started).
• Fixed tax will be levied per square yard/feet.
• Those investing in the Naya Pakistan Housing Programme (NPHP) will only have to pay 10% of the requisite taxes.
• The construction sector will be given industry status, and a development board will be established for the new sector.
• The government will offer PKR 30 billion in subsidies for the NPHP.
• The withholding tax will be waived off for all construction firms concerned, except steel and cement companies (this will again benefit people associated with the real estate sector).
• The Capital Gains Tax will be waived off for the families selling their homes.
I think nobody in their sound mind can argue that the incentive package is not going to fare well for the real estate sector. This is because it offers some hope; especially in light of the current COVID-19 pandemic and its resulting global fallout. Additionally, this is not only going to benefit the housing schemes and big companies associated with the construction sector, but also the daily wagers and labourers around the country. Moreover, as the fear of background checks and investigations into income sources is negated, I think people are going to be more willing to pour their money into the sector this year. The chance to invest without being questioned and investigated by NAB is one that not many individuals will pass up.
Whats about the Stamp Duty, Corporation/TMA Fee, withholding Tax???
@Muhammad Arbab sab: In addition to what Raja sab mentioned (which is basically the outline of Imran Khan's address the other day), there are several measures that Punjab has also announced. Apparently, Khyber Pakhtunkhwa has also announced similar measures – but I don't know their exact details.
For Punjab, the following shifts are particularly notable:
1. Most importantly, the Stamp Duty and CVT combined rate has been reduced to just 2%,
2. For three months, no sales tax will be imposed on construction services,
3. Apparently, instead of the going provincial/municipal fees and taxes, a total of 2% of the property price is going to be charged.
Aside from all this, what I feel is going to help the real estate sector the most is the fact that there are apparently going to be no questions – and very low taxes – on the construction and purchase of constructed buildings.
These two allowances should definitely boost both real estate and construction in the medium run.
In the past, all of us know that the Real Estate sector has been the backyard where people parked their money, evaded taxes and hid their source of income. The government has been going on and on about accountability and bringing everyone under the tax-net, while the IMF has, in turn, been pushing the government as well.
And now the new relief package for the construction sector grants investors and buyers the opportunity to invest their money – with no questions asked on their source of income. I have two questions: First, will this clause push people to invest generously post-COVID-19? So that they can whiten theirs? Second, what is IMF's position on the new package as we are an economy run under their programmes? Can we presume that the IMF has been taken on board?