The real estate sector is considered a wealth creation industry for local and overseas investors, connecting 40 allied industries and 200 sub-industries. When the Budget 2022-23 was proposed, various new tax measures for real estate were introduced. These new measures included:
Capital Gain Tax (CGT) increased to 15%
FBR increased advance tax to 2% for filers and 5% for non-filers.
Individuals who have multiple properties (value over Rs250 million) and derive rental income equal to 5% of the fair market value of the capital assets will pay 20% tax on their rental income and 1% tax on overall rental income.
These new measures have been considered unnecessary as they have negatively impacted the real estate market. According to real estate professionals, business activity in the property sector slowed by 50% in July, creating unemployment and discouraging investment. Considering the impending fallout in the property sector’s growth, the government had decided to give tax relief by withdrawing 20% of deemed income tax in September. However, the proposed advance tax for filers and non-filers remains unchanged, causing a serious threat to the sector’s growth.
The gain and old property taxes have been set as 2% for filers and increased from 5% to 7% for non-filers. In addition, the FBR collection and raising stamp duties have increased the transfer and registry costs of plots and houses. Such unnecessary tax hikes can prove detrimental to the real estate industry as it would not be attractive for people to invest in it.
These increased taxes have adversely impacted the builders and constructors involved in the industry, and frequent strikes have been seen in various districts in the wake of these taxes. In such circumstances, industry professionals have asked the federal government to withdraw the unfair increase in property taxes so that the industry can work smoothly. The government should reconsider the proposed tax structure to save the business community from the burden of additional taxes.