For the real estate market, the Budget 2022-23 could be a turning point. Housing, construction, retailing, hoteling, and rental of facilities for official or trading reasons all fall under the real estate sector, which has steadily evolved into a major source of economic growth in Pakistan.
Impact of Pakistan’s annual budget on the real estate industry.
Real estate is the key factor in Pakistan’s economical Rise.
Real estate can be the economic backbone of any country. Cement, timber, building, sanitary fittings, glass manufacture, steel, furniture, paint firms, plastics, electric fittings, cables, and electronics are among the more than 200 industries in Pakistan that rely on real estate.
The rapid change in Pakistan’s GDP.
The building and housing sectors’ total contribution to the country’s GDP has continuously been above 9%. Real estate provides a reliable source of income with the opportunity for capital growth and diversity. Real estate values rise in tandem with GDP, providing a direct method to participate in economic prosperity.
In the past, successive administrations have mostly ignored the real estate sector, and the lack of a strong regulatory framework has stifled the sector’s growth and potential. The current government has finally chosen to pay attention to the sector and devise a plan for its rebirth, eventually lifting it to the status of an industry.
Given the growing demand for affordable housing and the need for overall demand generation in the real estate business, which is still recovering from the epidemic, the industry has issued a slew of demands to get back on track. The real estate industry anticipated, among other things, relaxations that promote affordable and rental housing with the announcement of the Budget 2022-23.
Budget for the year 2022-2023
Pakistan’s government released its fiscal year 2022-2023 budget on Friday.
The proposal appears progressive, with total spending of Rs9.502 trillion to stabilize the impoverished economy and ease the suffering of persecuted communities.
However, due to new property tax rules, this budget has a variety of effects in different industries, particularly in Pakistan’s real estate market.
New budget and tax issues.
The construction industry is critical to the economy’s growth since it encourages the expansion of over 50 allied industries.
The government proposed in the new budget that owners of more than one immovable property in Pakistan worth more than Rs25 million be assumed to have received rent equal to 5% of the fair market value of the immovable property and pay tax at 1% of the fair market value.
In the case of a one-year holding term, the government had also levied a 15% tax on capital gains on immovable property, which is extraordinarily excessive.
Moreover, the advance tax on property sales and purchases for tax return filers has been increased from 1% to 2%. All of these tax measures will have a negative impact on the real estate industry as a whole, as well as increase unemployment.
Taxes on Non-Filers
Government should increase taxes on the non-filers of tax returns, but it should avoid imposing more taxes on the filers. The ICCI president also mentioned that a 2% tax had been imposed on all persons with annual income of Rs300 million or more, including companies and Associations of Persons (AOPs). To relieve the business sector of the burden of superfluous taxes, this tax should be revisited.
Agriculture and agro-industries have been exempted from customs duty in the current budget, but other industries have been overlooked.