Darkening clouds over real estate
MEDIA reports say the real estate business, which was previously thronging, has plunged into darkness due to unrealistic formula adopted by the Government for taxing the sector. Combined effect of manifold increase in market valuation, enhancement in capital gain tax and retention period condition have led to about seventy percent reduction in proper transactions during the last two months forcing many property agents to close down their businesses.
Construction sector has been contributing significantly to the growth and development of the economy as it supports dozens of other sectors and provides direct or indirect employment to millions of people. It was because of its potential to help tackle problems confronting the economy that the Government of former Prime Minister Shaukat Aziz offered liberal incentives to the construction industry and as a result it demonstrated a robust growth and also contributed hugely to national exchequer. No one would disagree that those in the business of real estate have been minting not millions but billions; however, they did not pay their due taxes and therefore, there was dire need to bring them into tax net and make them pay what they ought to. But this should have been done gradually and in a fair manner to ensure that the prescription being proposed does not hurt the sector negatively. The timing of the measures announced by the Government has also forced some analysts to conclude that these were aimed at diverting the local money to the real estate market of Dubai, where many influential Pakistanis with right connections have invested money but the market was witnessing recession. Now there are also reports that the money is fleeing to Dubai and other foreign destinations due to repressive taxation measures conceived and forcefully implemented by the Government. Unbending attitude would hurt construction industry as it has the IT and Telecom sector due to huge taxation and therefore, the authorities concerned ought to review their policy.