Pakistanis living overseas are a key contributor to the real estate economy in the country but are recent tax changes discouraging these invaluable investors?
After four years of acting like a bull, the real estate market in Pakistan appears to be cooling down, according to analysts at Lamudi.pk. Industry experts point to the amendments to Section 68 of the Income Tax Ordinance 2001 that became effective in July as holding part of the responsibility for the swing in the market.
Certainly, overseas investors have been bitten and the deep running consequences of this are multifaceted. There is now in effect a discrepancy in the withholding tax policy—a tax deducted at source, especially one levied by some countries on interest or dividends paid to a person residing outside of that country. The rate of this tax has doubled from two to four percent on property purchased by non-filers simply because they are non-resident.
Reeling from the tax increases, overseas Pakistanis may very well look elsewhere for their next investment. Dubai is one such place that may benefit from these new tax laws. Since the imposition of the new withholding tax on banking transactions, Dubai has seen a steady increase in real estate investment—20 billion dirhams in 2015. The real estate market in Pakistan relies heavily on money received from Pakistani investors living outside of the country but recently this flow of capital has decelerated.
“It does seem strange that overseas Pakistanis are on one hand exempt from filing an income tax return but have to pay withholding tax at the time of purchasing a property in Pakistan”, said Saad Arshed, managing director of Lamudi Pakistan. “Since the amendment, we have noticed a drop in online property searches from outside of Pakistan,” Arshed added.
Given the palpable correlation between the value of overseas investment and the health of the real estate sector in Pakistan, the government might need to investigate the tax regime in further detail. Buyers are being hit from all angles with capital gains tax increased to 10 percent, advanced taxes have risen to four percent and stamp duty up 50 percent.
However, on the plus side, the exchequer will see a much higher take from the vast real estate sector and this money can be used to enhance vital infrastructure and support the construction of affordable housing, an issue which Pakistan desperately needs to address.
This all is done to facilitate stock market…Now every one see opportunity in stock, That is just a Bubble boom…!!!
In last 3 months, Lahore real estate market has witnessed 10% drop in prices of (developing projects). Same with Karachi and Islamabad. A further decline of 10% is expected if this slump prolongs. There are many factors that caused this slowness.
1) drop in remittances due to middle east economy crisis
2) drop in remittances due to new taxes in pakistan
3) fear of local investors because of new taxes AND black money issue
4) natural economic cycle of boom and bust. now is the time of bust
5) MOST important factor is market PERCEPTION which is negative at the moment. and as we all know perception matters a lot.
Pakistan’s Tax Policy Is Scaring off Real Estate Speculators and Gamblers. Thats what you wanted to say.
Its good that biggest avenue of black money is being regularized. Overseas Pakistani’s should have no problem since they are tax payers at the earning country and have valid proof of earned income, however locals should keep away if using black money. I heard somewhere that people who bought plots at City Housing Faisalabad have been sent notices by FBR. If it is so…… I am glad at least we have started organizing our economy.
I agree as an overseas Pakistani.
I think you are missing the point. I am an overseas Pakistani and i am not a filer as i am exempt from filing. What i understood from the new regulations is that i have to pay higher taxes in case i am not a filer. Now why should i become a filer when i am exempt from filing? The only reason is to avoid paying withholding tax as otherwise there is no mechanism to reclaim withholding tax if i am not a filer.
Correct me if my understanding is wrong as that is exactly what i have been advised to become a filer. To be honest i have nothing to hide but i dont want to take extra burden and every year have to do it keeping in mind that we already do the same at source country.
Ishaq daar is best at manipulation.
intelligent comment ! looks like the effect of bhang has worn off
While it seems u have overdosed it today.
and the guy in your display pic is a ranting baby.
I hope you aren’t working from the special social media department of raiwind. Otherwise you wont get offended that quickly…
You caught him :P
nobody should be scared now, investors should compete, rather then enjoying tiny amounts of taxes
You really must be on bhang to believe in that statement
why is that so, dont you know how the landlords enjoying no check and balance on real state for past
As an overseas Pakistani, I would like to tell you that overseas Pakistanis have no problem with this new law as all their money is earned through legal channels. They are also used to paying much higher taxes in other countries so this is not really a deal breaker. The slight drop in market is purely because the amount of black money that was floating around in the market has reduced thanks to the new laws. Most of that black money was from local ‘businessmen’ and politicians.
This is only one of the factor. There are many other factors as well. That is long story.
Just for your info most of the new taxes have been reversed but negative perception is already set in market and perception is bigger than reality.
It’s good that overseas investments are slowing down. Let’s not inflate the overt self importance given to overseas Pakistanis who ran away from this country to serve someone else for personnal economic benefit while complaining and cribbing about this country. They have no right to say anything about the problems in Pakistan unless they are here and actively helping solve those issues. Their remmitances are also for their families back here, not for some nation-serving reason.
And they needn’t return back in old age just to be buried here. Pakistan does not need their old rotting bones. It needs their youth and steadfast commited efforts while being inside the country. If they serve and benefit some other country, they should not have any qualms about being buried there too.
Previously, an ordinary salaried Pakistani could work hard and afford to buy a house in a decent place using money from many years of hard work. Now the investments from these overseas Pakistanis over the past 10-15 years has made it impossible for such a person to buy a shelter for self and family due to exploding and infalted real estate pricing. The government and city administrations are not bothered about making available affordable housing.
Also, excessive money from them have also caused many social vices and ostentatious displays of wealth.
Bitter truth and I agree to some extent.
Shukria. Aap ne mere dil ki baat ker di hai jo aik talkh haqeeqat hai aur shayad bohot soun ko hazm nahi ho gi.
As an overseas Pakistani, I agree 100% that we left Pakistan for our economic / personal benefit. I also agree that unfortunately the real estate prices have gone way beyond regular salaried person in Pakistan but I won’t blame it totally on overseas Pakistanis. Overseas Pakistanis do not earn as much as you might imagine. This inflation is also because a lot of local politicians and ‘businessmen’ make way too much money (a lot if not most of it illegal) and hence can afford to pay high prices.
Regarding your other point, I don’t think all overseas Pakistanis only come to Pakistan to get buried. Many go abroad to make themselves financially more secure and once that is done, they come back and live with their families and in their culture. Most of us human beings are selfish creatures, very few are selfless to the point of sacrificing their family / personal comfort for sake of their country. Maybe you are one of those selfless people, but I am not.
For Latest Property Tips and Advice
Star Marketing Pvt Ltd is offering Best Property for Investment in Pakistan great locations great facilities at affordable prices,