ISLAMABAD: The government is set to further increase property valuation rates by about 30% for major cities of the country from July, a move that is expected to angry real estate agents and traders much like it did last year.
The move comes as the real estate sector, once labelled ‘dead for revenue purpose’, has started generating cash for tax authorities.
As a result of the increase in property valuation rates for federal tax purposes under the first phase, the government’s revenues from the sector increased 100% to roughly Rs 15 billion while property transactions also grew by one-tenth during the July-April period of the outgoing fiscal year.
“Under the second phase, the government would notify fresh property valuation rates for major cities by June 30,” said Federal Board of Revenue (FBR) Chairman Dr Mohammad Irshad on Tuesday. He said that the rates would go up by another 30% on average, but these would still be lower than the actual prevailing market rates.
The government also plans to increase the number of cities included in the plan from 21 to approximately 30, said Irshad. The new rates will be notified after the approval of the Finance Bill 2017.
FBR officials said that there was a plan to bring Larkana, Khairpur and Shaheed Benazirabad under the sphere of the new property valuation regime. At least two more cities will be included in the list and Okara could be one of them.
In August last year, the FBR had notified fresh property valuation rates for 21 major cities which provided a new base for the collection of withholding and capital gains tax. Withholding tax rates range from 1% to 3% while the CGT rates are in the range of 5% to 10%.
These rates were higher than the prevailing Deputy Collector rates but were still only 30% to 40% of actual market rates.
Now the plan is that the property valuation rates should jack up by another 25% to 30% on average over and above the previously increased rates. In cases, where the rates were earlier on the higher side, the increase could be 15% to 20%. However, there would also be cases where the FBR would lower the rates, mainly in Karachi and Faisalabad, said officials in the FBR.