ISLAMABAD: Heavy taxation measures announced in the federal budget 2022-23 are likely to harm the real estate sector’s growth, leading to a downturn in construction activity. The government plans to collect Rs440 billion in revenue through increasing the existing tax rates and imposing new ones on the real estate sector.
Khalid Imran Chaudhry, a real estate agent, told WealthPK that the sector has been badly hit by the imposition of taxes to the tune of Rs440 billion on both the sellers and purchasers of immovable property. “An increase in withholding tax, which is paid by the purchasers of the property before it is transferred in their name, will lead to a steep drop in transactions,” he said. He said the government has in the budget 2022-23 increased the withholding tax to 2% for filers and to 5% for non-filers from 1% and 2%, respectively. Abbas Khan, another real estate agent, told WealthPK that the government in the new budget has stipulated that owners of more than one immovable property of above Rs25 million in value would be deemed to have received the rent equal to 5% of the fair market value of the property and shall pay tax at the rate of 1% of the fair market value. He added that the government has also imposed a 15% tax on capital gains on immovable property in the case of one year holding period, which he said was very high.
“A 15% tax is applicable if the property is sold within one year of its purchase, 12.5% will be charged if the property is sold in two years, 10% in three years, 7.5% in four years, 5% in five years, 2.5% in six years, and there will be no tax charged if the property is sold after seven years,” Abbas explained.
Another real estate agent, Faisal Latif informed WealthPK that the government has also imposed many new taxes in the federal budget, which would badly impact the real estate transactions. “These high taxes will create unemployment,” he said, urging that the government withdraw them to save the construction industry.
“There will be an adverse impact of the new taxes on the construction sector, and the heavy taxation will increase joblessness in the country,” Faisal warned.
Syed Adnan Ali, who intended to purchase a plot, said that it is now very difficult for people to buy property due to high taxation. “An increase in the existing taxes and the imposition of new ones will slow down the residential as well as commercial construction activity.”
He said it is now very difficult for a middle-income person to own a house. “These new taxes have changed his mind from constructing a house to purchasing a one or two-bed apartment in a high-rise building, which he can afford.”
Farhan Shabbir, who also wanted to purchase a plot to construct a house, said he has shelved his plan after the heavy taxation rendered the property out of his reach.
–INP
