Deadlock persists over real estate valuation

Even after holding two rounds of talks on Thursday, the real estate sector representatives and the tax authorities of the Federal Board of Revenue have failed to resolve the thorny issue of real estate valuation but have decided to have another go and try to remove their differences in another meeting today (Friday).

The morning session lasted for more than two hours which was then adjourned to reassemble in the afternoon to settle the differences. The discussion ended without success but the two sides agreed to negotiate again on Friday.

Talking to media after the talks, FPCCI President Abdul Rauf Alam said that the talks will continue to sort out a middle way. However, he added that valuation rates could not be increased overnight as it would raise problems for the real estate sector. About the amnesty, he said that it will be taken up in the second phase after resolving the valuation issue.

Association of Builders & Developers of Pakistan (ABAD) Vice President Arif Jeewa said that talks were headed towards a settlement. He said that that was a big difference in the market and DC rates but both sides have shown resolve to bridge the difference; however, it should be gradual.

According to an official source, the real estate representatives stressed that a gradual approach should be adopted to determine fair value of the real estate. They suggested that all the regulatory, fiscal and tax uncertainties should be reduced to protect the investment in the sector.

He said that the fair market valuation lists of 21 cities were closely looked at during the talks. There were some issues over valuation. Both sides have given their suggestions and these are likely to be fine-tuned tomorrow. FBR officials also want to show some good progress to IMF authorities in their talks next week.

The source said the real estate representatives proposed that all the transactions before June 30 should be treated as past and closed transactions. They suggested that the duties and registration charges should be brought down in proportion to the values increased.

They opposed the imposition of advance income tax on immovable property, as they argue that the transactions were from a person’s accumulated wealth and not from the yearly income. In the absence of credit facility, this will add too much burden on the buyers and sellers.

It was suggested that for the calculation of capital gains tax on the real estate sector, the value of immovable property should be enhanced 50 per cent as compared to DC rates before June 30. But the valuation of capital gains tax should be reduced to maximum of two years. The proposed gains tax from the filers should be only 1 per cent.

They stressed that the provincial governments should be pressured to increase their DC rates on annual basis. The real estate sector should not be crushed due to lethargy of provincial governments.

It was also demanded that the government should not ask any investor of plot, flat, shop of house for the source of income for at least the next five years. The owners should be facilitated to regularise their assets by paying 1 per cent tax as per valuation till December 31.