Only few days ago, Federal Finance Minister Mr Ishaq Dar from the ruling party PML-N has presented budget for the fiscal year 2015-16. Since then, the gurus and financial pundits are busy determining the impact of federal budget on different economic sectors. Business community and most of the Pakistanis appreciated government for announcing such positive budget.
However, when we specifically talk about real estate sector, it is witnessed that apparently no new taxes were imposed on real estate sector but at the same time, it did not give any relief to property buyers, sellers and investors. Moreover, the federal budget is failed to offer any incentive for affordable and low cost homes for middle and low income strata. Inflation ensnaring Pakistan makes it really difficult for lower class to construct homes. PML(N) took the initiative to provide low cost and affordable homes to poor and homeless people and announced a mega project Ashiana Housing Scheme in Punjab.
The darker side of the picture depicts that Ashiana housing project is just announced in Punjab, which is not enough to meet the shelter needs of every Pakistani belonging to lower-middle class. Few months ago, Federal Minister for Housing & Works, Muhammad Akram Khan Durrani, declared the government has decided to construct homes and finalized the sites for the construction of low-cost housing units in the District of Lahore, Charsadda, DI Khan, Jehlum, Karachi, Bannu, Hyderabad, Quetta, Lakki Marwat, and Gwadar. No further progress in this regard has been witnessed.
Experts were expecting announcement from Federal Government in this regard but the issue seems not to be too interesting to ponder on. Federal Budget failed to offer incentives for low budget homes and even government did not declare any such plan. Real estate professionals were expecting that government would extend its support in form of funds allocation to the affordable housing plan but it did not.
Experts at HomesPakistan.com stated that previous governments did not take serious steps to mitigate housing issue but PML-N took the initiative and announced to construct 0.5 million homes throughout Pakistan and people were expecting something concrete in this regard. To our dismay, no such disclosure was made regarding this plan in federal budget.
At the same time, it is worth mentioning that to encourage organized and corporatized sector to make investment in real estate sector, incentives are announced for REIT development schemes, which are as follows:
- Capital Gains of any person who sells a property to a REIT development scheme formed for the development of housing sector is proposed to be exempt from Income Tax up to 30.6.2018.
- It is also proposed that if a development REIT Scheme for the development of housing sector is set up by 30.6.2018, for the first three years the rate of Income tax chargeable on dividend income of such REIT may be reduced by 50%.
Echoing similar views, several real estate agents expressed mixed emotions regarding federal budget. However all of them agree that Pakistan real estate sector needs reforms on serious basis to make this sector more attractive for genuine property buyers.