RDA to Start Land Demarcation of the Leh Express Project

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The Rawalpindi Development Authority (RDA) has started land demarcation for the Leh Expressway project. The project is divided into city and cantonment areas, where the demarcation of cantonment areas will be completed in the first phase and the identification of land in the second phase by the jurisdiction of Rawalpindi Municipal Corporation. The Punjab government had allocated Rs55 billion for the Leh Expressway project in the budget of the financial year 2021-22.

The Leh Expressway is an 18km long project that will start from Ammar Chowk and end at IJP Road Islamabad. The project will be completed under public-private partnership (PPP) and will emerge as a game-changer project for the city. The Leh Expressway project will boost economic activities and help in the resolution of many problems like reducing travel times and improving highway safety standards. The project is important because it will help save the city from urban flooding caused by the Nullah Leh in the monsoon season every year.

The properties along the expressway have been declared commercial for the construction of multi-storey towers and plazas. The government has also decided to plant 150,000 fruit-bearing trees to provide shade on both sides of the expressway. The residents of areas that have been demarcated for the construction of the Leh Expressway in the Rawalpindi district have demanded that they should be paid market rates for their properties. In this regard, the price committee has fixed rates of lands along the nullah and will inform people about the rates in different areas.

FBR to Suspend Unregistered Real Estate Agents

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The Federal Board of Revenue (FBR) has announced to suspend unregistered real estate agents by January 1st, 2022. The government is tightening the noose on who can do property deals by introducing a registration system for real estate agents in Pakistan. The country has been on the FATF’s grey list for deficiencies in its counter-terror financing and anti-money laundering regimes. Pakistan has taken swift steps towards improving its AML/CFT regime.

Recently, the FBR has announced a mandatory condition for real estate agents to get registered as Designated Non-Financial Businesses and Professions (DNFBPs) under the Anti Money Laundering Act 2010 (AMLA 2010). The FBR prevents the offences of money laundering, predicate offences, or financing of terrorism by DNFBs through imposing conditions under the relevant provisions of the AMLA, 2010. The tax department further added that no public or private development authority shall conduct the business activity with any real estate agent for the transfer or registration of immovable property unless the real estate agent is registered with the FBR as a DNFBP. Any violation of this condition shall attract the penalty provision under AML Act 2010 and AML/CFT sanction rules 2020.

The government has made substantial progress in making its counter-terrorist financing systems stronger and more effective. Pakistan has made progress, but It needs to exit the grey list because a potential downgrade to the blacklist can have serious implications for the country. Being on the blacklist means the country’s banking system will be regarded as one with poor controls over AML and CFT.

Increasing Construction Costs Lead to Stalled Development on Naya Pakistan Housing Program

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Work on the Naya Pakistan Housing Program remains stalled due to a price hike of essential construction items. It is now becoming a major challenge for Naya Pakistan Housing and Development Authority (NAPHDA) to provide housing units for poor and needy people. Even though the housing crisis is a growing concern for the incumbent government, not even a single brick has been laid so far by NAPHDA itself, a corporation established to deliver 5 million housing units to the citizens.

NAPHDA acquired a hefty loan of Rs 80 billion from the State Bank of Pakistan to subsidise housing units for the poor. The increase in the construction cost affected the development of the Housing Program. The essentials needed for the construction of a house, including labour, cement, brick, and barring, have shown a 40 percent increase from 2018 to date. The government is trying to increase the subsidies for buyers and incentivise the builders to execute the programme.

NAPHDA acts as an umbrella that oversees all those projects. It is only responsible for giving clients to the builders and spotting out the most deserving ones (poor people) to be awarded housing units. It also creates employment opportunities for both skilled and unskilled human resources.

Importance of Due Diligence in Making Real Estate Investments

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Introduction

One of the most important steps throughout the real estate investment cycle is conducting due diligence. In the process, there is a period in which a potential buyer can carry out their investigation to receive full disclosure of the facts and conditions of a potential asset before completing a transaction with a seller. Real estate investors must investigate the physical and financial facts about a property to find out its prospective value and to verify the claims of the seller. In Pakistan, a lack of transparent real estate practices makes it even more important for buyers to conduct due diligence in real estate related transactions. Non-transparent practices in the sector have blurred the lines between legal and illegal developments. In recent years, development authorities have started to act against illegal projects, highlighting the need for due diligence for buyers and sellers.

Why Due Diligence is Important

Conducting due diligence before investing in real estate is one of the most crucial steps for successful investing. The absence of this step or its neglect can lead to heavy financial losses for the buyer and ultimately lead to loss of investor confidence in the sector. In a 2013 survey on global real estate customers, 44% of real estate investors were unsatisfied with their property deals. Lack of access to verified and correct property and real estate details leads to a broken and fragmented fact-checking and verification process, which ultimately snowballs into poor investment decision making.

In Pakistan, the lack of due diligence is common amongst real estate investors. It has also led to the increase in illegal housing societies, unplanned Katchi Abadis, and subdivisions with sub-optimum utilization of agricultural land. In Karachi, 60% of the city’s residents live in informal settlements (katchi abadis). In addition, 69% of housing societies in Pakistan are illegal and most of the real estate investors avoid or neglect the due diligence part of the real estate investment process. This fact also points out how real estate investors and property dealers coax illiterate or unknowledgeable people into investing their life savings into an investment that is not verified or approved by relevant authorities.

What is Included in Due Diligence?

Due diligence should be performed by all parties involved in the real estate investment process. Under a real estate investment, one of the most important documents a builder or developer must hold is a No-Objection-Certificate. A NOC is a document that contains fundamental information about the parties involved in the construction/establishment of a particular residential or commercial real estate project.  The NOC is issued for a wide variety of agreements like rental agreements, traffic offences, investigations, and admissions among other things. Besides a NOC, a title document is also an important document as it is necessary to prove the ownership of a property and serves as a legal statement of the title of the property. To trace the ownership history of any given property back to its original seller a mother deed is required. The document enables anyone to be aware of the list of owners of a particular property/real estate. This can help individuals become aware of any significant facts about their properties before they make a purchase. In the case of residential property financed under a housing finance scheme, a bank approval certificate is also a relevant document as this document means that the bank has checked and scrutinized all compliance issues with the pre-ordained construction laws of the local authorities. Lastly, the encumbrance certificate is also included in the list of relevant documents for due diligence before buying a property. The document is proof that no transaction rests against any given property like a mortgage, title transfer, or any pending loans.

Conclusion

Due diligence allows you to make an informed decision about whether a certain investment is right for you or not. There is a list of documents and verification procedures that needs to be done by the buyer and the seller before entering a real estate investment. In Pakistan, the lack of due diligence by a majority of real estate investors have resulted in the proliferation of illegal housing schemes and projects. Real estate investors are insisted to acquire important documents like a NOC, bank approval certificate, mother deed, amongst others to verify and check the financial investment background of the given property.

Government to take Measures to Uplift Rural Areas in Islamabad

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According to the Minister for Planning, Development, and Special initiatives, Asad Umar, the Government has taken concrete measures to bring the rural areas of Islamabad at par with its urban areas through the provision of all basic facilities to the people. Prime Minister Imran Khan has also constituted Islamabad’s master plan commission which is working on a plan to end the difference between rural and urban areas in terms of urban facilities.

The government has also ensured a 50% quota of the residents of Islamabad in federal jobs from grade 1 to 15. Many development projects in the federal capital have already been completed including Rawal Dam Interchange, G-7 underpass, Burma bridge, Kiani bridge, Malal bridge, and the PWD Interchange.

Poor quality of life and low basic facilities of rural areas highlights the need for development in the rural sector. The development of rural areas is important for the growth and prosperity of Pakistan. The Islamabad master plan commission has planned to reconstruct around 50 to 55% of rural areas of Islamabad by June 2022

1252 Kanals of Societies in Islamabad Registered without Tax

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The district administration has registered 1,252 Kanal prime land in the name of three persons. The societies were registered without collection of over Rs 350 million mandatory capital value tax (CVT). CVT is payable by individuals, firms, and companies which acquire an asset by purchase or a right to use for more than 20 years.

Taxation is important for many aspects of an economy’s growth. Collecting taxes and fees is a fundamental way for countries to generate public revenues that make it possible to finance investments in human capital, infrastructure, and the provision of services for citizens and businesses. Tax evasion results in lower revenue for the government that places greater constraints on government spending on public goods and services, hurting economic growth.

The Federal Investigation Agency (FIA) has initiated an inquiry into the allegations of tax evasion, illegal extension, and commercialization by housing societies. The legal and judicial system should provide the right incentives to prevent tax evasion, and tax agencies and their auditing teams should play a crucial role in identifying and punishing offenders.

Traders Laud Reversal of Property Tax Hike

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The government of Punjab has taken the decision to withdraw the increase in property tax. Punjab Minister for Excise and Taxation Hafiz Mumtaz Ahmad and Secretory Waqas Ali have played important roles in it. The withdrawal of an increase in the property tax will provide relief to the business community.

To raise tax revenues, the Punjab government had previously decided to increase property taxes. The government had increased the commercial property tax from 10 percent to 300 percent per annum in its federal and provincial budgets for 2021-22. The Lahore Chamber of Commerce and Industry (LCCI) and small traders started protesting the hike in property tax and demanded that the government withdraw the increase in the property tax. According to the president of LCCI, they were only protesting the unfair taxation and will be open to paying taxes otherwise. Chief Minister of Punjab Usman Buzdaar has accepted the recommendation of LLCI to reverse the property tax hike and ease the problems of the business community.

This decision comes as a good omen as the business community is already facing challenges due to rupee depreciation, an increase in the key policy rate, and soaring inflation. The reversal of the hike would help build trust in the government and promote public-private partnerships (PPP).