PM Relief Package, How It Can (Would) Turn The Fate Of Pakistan’s Real Estate
Real Estate has great importance for the economy of any country. In Pakistan, there has been a slowdown in Real Estate since 2017 because of political instability and uncertainty of economic and financial policies.
Lack of incitation for investors, the command of a ban on non-filers to buy a property worth more than 5 million unless they disclose themselves with the Federal Board of Revenue (FBR).
FBR’s strict directions on banking transactions of non-filers, the levying of high taxes on transfers of property discouraged the investors from putting their money in the sector in 2018-19.
Another factor that contributed to the slowdown of the Real Estate is the non-utilization of the development budget that led to the contraction of the construction sector and consequently, the realty sector.
Despite these problems, there are compelling facts that indicate the 2020 year will be encouraging for the investors, especially for the overseas Pakistanis. One of these initiatives is the Prime Minister relief package that was announced on the 3rd of April 2020 for both the public and private sectors.
From the following points, we can understand how PM Relief Package can turn the fate of Pakistan’s real estate and consequently, the economy of Pakistan.
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Amnesty Scheme On Construction
Govt. of Pakistan has announced Amnesty Scheme for the construction industry. It means that from 2020 to 2022 if a person invests in the construction industry, whether it is for residential purpose or it is for commercial, there would be no questioning on the construction.
Before the Amnesty Scheme, every person was bound to prove his source of income for purchasing any property in Pakistan.
Reduction On Sales Tax and Excise Duties
There would be a positive effect on every ordinary person of this point, and a golden chance for the people who want to build their own houses or commercial buildings.
The Government of Pakistan has introduced new policies, a sales tax that was 4.5% on materials and GST that was 8% to 16%has been decreased and in some places is nil. As a result, it would reduce the construction cost of the investors.
Sale Tax On Service Charges
Furthermore, the Government of Pakistan has taken another critical step to reduce the construction cost. It means that if a person wants to build his house or a commercial building and he takes the services of a construction company that is registered, he would pay a 7.5% Provincial Tax on construction services.
Moreover, if the company is working on a big scale and its annual business is more then 50 million, then it would fall in the Federal GST, which is 8% to 16%. The Federal Govt. with the collaboration of the Provincial Govt.has abolished the tax on service charges that would result in the reduction of construction cost.
In fixed taxation, a person who wants to construct his house from a construction company would pay RS 50/sqft to the Govt. It means that if he wants to build a 1000 sqft house, he will pay 50,000 RS to the Govt. of Pakistan