The Federal Board of Revenue (FBR) has announced an increase in Property valuation rates in 56 cities in Pakistan. The new valuation will be effective from November 01, 2024. What will be the Impact of FBR Raises Property Valuation is a matter of concern for customers and realtors. It is an effort to balance the Official property rates (DC rate of property) with the actual rates in the market.
According to the new valuation notification by FBR Pakistan, the new property rates will apply to residential, commercial, and industrial properties.
Why has FBR increased Property Valuation Rates?
There was a significant gap between the official property value and market value for many years. It results in a lower collection of property taxes. FBR Pakistan has gradually increased its property valuation from 2018 to 2022. However, the enforcement of the revised property valuation has started now. It seems that property valuation has risen in various cities of Pakistan.
According to Chairman FBR Mr.Rashid Mahmood Langrial, the sole purpose of the property valuation increase is to reduce property tax underreporting, increase tax transparency, and enhance revenue collection.
Cities Under Impact of FBR Raises Property Valuation
This property valuation rate increase is for various cities across Pakistan, from metropolitan to lower cities. Here is the list of cities:
- Karachi
- Islamabad
- Lahore
- Faisalabad
- Peshawar
- Rawalpindi
- Quetta
- Multan
- Abbottabad
- Gujranwala
- Sialkot
Despite that, other small cities are part of the list, totaling 56 cities.
Impact of this Policy on the Customer and Real Estate Market
The recent hike in official property valuations across 56 cities in Pakistan, aimed at increasing property tax revenue, is likely to have a notable impact on customers and the real estate sector.
Impact on Customers
It will affect the customers in the following ways:
Increased Transaction Costs
Higher property valuations will increase taxes such as Capital Gains Tax (CGT) and Stamp Duty. It could lead to increased costs for buyers and sellers, especially in urban areas where valuations are higher, discouraging some potential buyers.
Reduced Affordability
With increased transaction costs, home buyers, particularly middle-income and first-time buyers, may find it harder to afford properties. It could result in slower sales and reduced demand in the market, particularly for higher-end properties, where tax burdens are more substantial.
Shift to Informal Transactions
Higher taxes might encourage some customers to undervalue properties or engage in cash-based transactions to avoid full tax liabilities, increasing informal and potentially less transparent transactions.
Impact on the Real Estate Sector
It will influence the real estate market of Pakistan in the following ways:
Market Slowdown
Higher property taxes can cool down the real estate market as transaction volumes may drop. Reduced demand might particularly impact speculative investors who rely on quick turnover and profit, possibly leading to a short-term slowdown in activity.
Potential Price Adjustments
Real estate developers and sellers may lower asking prices or offer incentives to offset higher tax costs for buyers. It could stabilize or even reduce property prices in some areas.
Shift in Investment Focus
As profit margins reduce in urban centers due to higher taxes, investors may look toward secondary cities or emerging areas where valuations (and hence taxes) remain comparatively low, potentially promoting growth.
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Disclaimer:
Please note that the information provided in this blog post is for educational and awareness purposes only and should not be considered professional advice.
Property Naama Group is not responsible for any investment decisions by our clients or investors based on the information provided.
