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Hunt to root out tax evaders begins

Hunt to root out tax evaders begins

Pakistan is a country where shadow economy is greater than the documented economy. But now FBR has started the hunt to root out tax evaders. According to the latest plans approximately 15,000 tax evaders will be brought to tax net. Most of the tax evaders are the real estate agents, developers and investors. According to FBR many people have bought properties in plazas and housing schemes but have no tax records. By bringing more people to tax net government will increase the revenue.

New measures by the government to curb black money

Already NAB is investigating 1000’s of illegal housing schemes and property scams. It looks like that the new national slogan is, ‘NO ASSETS BEYOND MEANS’. Every investor and buyer has to show the source of income. This is a stunning policy by the government to control the influx of black money into reality sector which has abnormally increased the property prices. Due to high property prices home owners are decreasing whereas renters are increasing. The honest tax payers are suffering as they cannot buy own homes.

Property price trends now and in the future

Pakistan property prices are falling since 2016 due to the introduction of higher taxes and crackdown against black money. At present property prices are approximately 20% down from 2016 peak. Pakistan real estate is facing the affordability crisis at the moment as market is adjusting to the buying power of the honest tax payers. As people with white money have low purchasing power if compared to the people with black money, so property prices will keep falling. Property prices will bottom out when either buying power of the people will increase or the prices will come down to the buying power. 50% property price fall from peak of 2016 is expected.

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(24) Comments

  1. Nazish Fatima

    on   said 

    one of my relative who is a small builder have buy plot in gulshan e maymer Block T2, and build double story house , renovate it very nicely . i also have visit to see it.

    Few days ago told me that he has left from this business, because he has hardly arrange buyer to sold out this house RS 130 Lakh on last month. He did not have any profit in this business and just have consumed more than six months .

    so what will be your opinion if the price will fall , then how much ?

    should it will fall whole pakistan ? or only karachi ? or will it on new areas or old areas also, where their is no plot is available?

    • Zahid Ali

      on   said 

      He must be thankful to GOD if he came out from market at break-even. The real estate market is sinking although currently interest rate are at merely 6%.

      The analyst are predicting that interest rate will increase in every quarter of 2018 in Pakistan.

      Sooner or later we will see the quarter page commercial banks advertisement on the front page of leading newspaper alluring people to come and invest in their bank and get this much profit.

      Same type of advertisement is already started. See the front page of daily Jang Karachi of 2nd February 2018. In near future, same advertisement with more interest rates are expected.

      At that time investors will start comparing that by depositing in bank, i can earn one percent or little less per month and rent on the equivalent amount invested in real estate is merely 0.3 percent per month for flat/house and zero percent per month for plot.

      At that time, double effect may be seen. One one hand, Investor who have property will try to sell their property even on lesser demand in order to encash their amount to deposit in bank but only fortunate one will get a buyer, while on other hand, buyer who have cash amount will prefer to deposit the same amount in bank and will postpone their plan to purchase property for a while.

      This is my analysis and I may be completely wrong.

      • Zahid Ali
        Good analysis.
        Rise of interest rate leads to foreclosure worldwide.
        If we see what happened in the last property crash or time of interest rate rise from 2005. Pakistan saw car financing issues as car loan payment was affordable due to high interests.
        Till 2025 Pakistan real estate sector will be low.
        Pakistan real estate sector will flush out black money in first stage. Second it will remain stagnant. Thirdly it will start rising with the direct foreign investment from China or other countries.

    • Nazish fatima
      This is the sure sign of real estate recession. During the crash of 2005 one of my friend also faced the same issue. He started the construction business. He built two houses of 5 Marla or 125 sq yards. House were sold out after 1.5 years at loss of 7 LAC. This was a huge loss at that time.
      I have told many times that wait & wait. I HAVE NOTHING TO GAIN FROM IT. Just want the people to avoid losses. Currently many builders and investors have sold out their cars and houses due to bad decisions.

  2. Muhamamd azeem uddin

    on   said 

    Dear sir,
    i personally visited many estate agent in the area of scheme 33, near saadi town Karachi on last sunday and one of the estate agent have told me that at block 5 saadi town 240 sq/yard structure / unfinished double story home is available for sale and it can be buy finally RS 76-78 lakh. owner is asking RS80 lakh however finally it can be managed RS 76-78 lakh.

    Agent said that it is very attractive price at this moment ,market is also become very slow pace and demand is become slow due to political unsuitability.He told me that situation will be better after election 2018.

    similarly i have been offered one estate agent on last sunday at gulshan e maymer karachi 400Sq/yard west open plot at sector T2 of RS 10.5 Million. However this plot price was asking September 2017 RS 14.5 Million and yet the plot is not sold out.The agent is saying same things of the above agent views.

    It means Real esate agent convincing the customer that prices will be go up once again after election 2018

    Author please give your analysis ,, would you agree about the agent prediction ??

    • Zahid Ali

      on   said 

      Dear Mr. Azeemuddin

      It is general trend that real estate prices become stagnant for long term (at least 3 to 4 years) after touching bottom. Keep in mind that, there may be very few exceptional areas/properties of which the price may rise.

      The real estate agents are always very optimistic in order to finalize the deal and they have the right to convey their opinion.

      As you personally visited the area, therefore it is confirmed that 240 yards double story house in Saadi Town is available in less than 70% price of 2016 peak.

      I visited Gulshan-e-Maymar in september 2017. At that time the brand new, 240 yard, double story house in sector T was available in 16.5 million. As you informed that the plot price in Gulshan e Maymar is decreased from 14.5 to 10.5 million (28%), therefore the corresponding price decreased should also be reflected in 240 yard double story brand new house.

      As I described earlier, the plots/flats/houses currently desperately available for sale in Pakistan are in thousands. The total genuine end user buyers can purchase not more than 10% (this is my personal idea) of the total currently desperately available for sale properties. Therefore who will buy the rest of 90% property.

      Therefore it seems quite difficult to maintain the current level of property prices, unless the bulk of investors step in to the market and inject trillion of rupees in the market.

      This is my analysis and I may be completely wrong.

    • Muhammad Azeem Uddin
      I have always said that prices will come down to 50% from peak. But the desperate situation I see, may be the prices fall more.What is happening is never see in Pakistan before. No buyer in the market. This is why property prices are falling like sand walls. What I feel this month and next months are very crucial. As the people who wanted to sell property will massively decrease the price.
      Time to buy will be when prices are record low. It might come this year end or start of next year. Buyers have the time and advantage. So why pay more?

  3. Zahid Ali

    on   said

    Above link showing, 240 yard, double story, brand new, in saadi town block 4, Karachi is available in 15 million.

    Below link showing, 240 yard, double story, brand new, in saadi town block 3, Karachi is available in 25 million.

    I took the maximum price house and minimum price house of same type and same area. Rest of the same type of houses are available in between, 21 million to 23 million.

    Before same type of house was not available less than 21 million.

    I dont understand why there is so much difference of same type of house.

    I think the desperate sellers are reducing prices.

    If same type of house is available in 15 million then who will pay 25 million. Subsequently seller who is asking 25 million will reduce his price sooner or later.

    This is my analysis and I may be completely wrong.

    • Zahid Ali
      1- Asking price has no real value. The actual thing is the selling price. I can ask billions of my house. But real price is the price which people want to pay.
      2- The above two houses have lot of price difference. Now its the game of nerves. Seller wants to get good price. But buyer wants to buy at less price. Buyer has time and more options.
      3- Seller holding power is very important in the crashing market. When property price is falling desperate sellers will see the property. But who can hold will try to avoid the heavy losses.

      1- GENUINE BUYERS who really need to buy property but due to high prices cannot afford. They are waiting for the prices to come down. Which are coming down slowly.
      2- EXPERIENCED BUYERS who have money but want to but property at cheap price. They want to benefit the desperation of seller. They are not in hurry as they know that prices are falling.

  4. muhamamd azeem uddin

    on   said 

    Dear Zahid sahab,

    Thank you for sharing the information,, and it must be happen like this because How many times these loved one real esate investor has been getting benefits from pakistan.

    The whole burden of tax collection are being in the shoulders of ,, salaried person,, Importers, manufacturers traders and little agriculture,,

    Just from January the FBR has imposed Regulatory duty from 20%50% on imports of goods as well as many raw material.

    Now i am looking may be Government have imposed further 50% to 100% Regulatory duty ,, But i think it is well known fact that even that the country can not run,, and whole system will be burst,,

    So that is why ,, LASTLY government have take action the DEAREST INVESTOR,, to take them in tax net.

    where as question is that why the governement have take this action DELAY,, and make a SATTA culture,, develop Gambling culture just like playing CASINO or to do business in real esate in pakistan,,, why ???

    this answer i will request to you please give Author and you if possible??

    what losses my nation??
    Due to high return of profit in real estate business, all , traders, manufacturer, exporters , shopkeeper, salaried person have started involve in real estate business. it means the manufacturing sector is shrinking, main reason export is going down, GDP is going down, simple answer is that : IF YOU WILL NOT PRODUCE THEN YOU CAN NOT SELL.

    Now everyone want to sale and purchase property,, nobody what to go in manufacturing setup.

    SIR i can not explain how my country have get losses and going downward duirng last 15 years.,

    our economy is based on borrowing money from world,, sometime i feel that , either we are poorer or leader have made us poor. or we are beggar or our leader make us beggar ??

    see our neghbouring countries, like india , their export USD 275B, their reserve USD 350B , See bangladesh their export USD 34B and reserve USD 33B and pakistan export 22B and reserve 14B.

    • paulo

      on   said 

      why do you want only Zahid or author of Ghar47 to reply to your question .
      Like in previous post who is the biggest cause inflation — not the people
      but the government — So what if there is No manufacturing base in
      Pakistan — the sky will not fall down and the Question is Why — For me
      the answer is there. Ponder the answer why and you see why
      and your question will be answered.

    • Muhammad Azeem uddin
      This is why real estate sector rise is not hailed by most financial experts. Reality sector does not create long lasting jobs but just create wealth illusion. few people get rich without much effort. Things are moving in the right direction. SATTA CULTURE HAS ENDED and now onward homes are just for living not for wealth collection as FBR will hunt the tax evaders.

    • Zahid Ali

      on   said 

      Dear Mr. Azeemuddin

      Firstly, the changing over from producing economy to trading economy is not limited to Pakistan only. We are not capable enough to start something by our own. Our politician learnt the same thing from the other countries.

      The speculation in real estate, stock markets, commodities markets are everywhere in the world and the so-called financial intellectuals called it free market economy. These are the outcomes of free market economy that how to deprive ordinary people from water, food, clothes and housing.

      The main problem is the individuals are greedy and same individuals are taking part to make rules and laws. The same individuals on one side are in the government while on the other side involved in the business. So individuals are reaping benefit at the cost of country.

      In CPEC, chinese are investing in power plant at the rate of 30% per annum profit by giving kickback to individuals government official. When pay back period will start then we will feel the pain.

      The same power plant could have been constructed by taking loan from IMF or world bank at merely 2 to 3 percent per annum, but thanks to our Chinese brothers who just want to make Pakistan more indebted country since their conditions for investment are more stringent.

      The circular debt in power sector is touching to 500 billion rupees. What next when all Chinese power plant will generate power at full swing.

      Every year 10 billion dollars are fleeing from Pakistan on account of money laundering.

      Although solution is available, but it is very difficult to have a consensus on the solution, since the real solution will definitely affect the billionaires of the world, and therefore these billionaires try to convince people for their own fabricated solution by hook or by crook. Their solution will only further enhance the unequal distribution of the world.

      Daniswaron nay dunya ki sirf tashreeh ki hai. Asal kaam to isko tabdeel karna hai.

  5. paulo

    on   said 

    Are you a poor man to jump upon the rich — abroad and locally — Remember in
    my previous post — Wealth tax — What is your net worth that you can also be
    one of the tax evader and if you are not a tax evader — be quiet.

    • Zahid Ali

      on   said 

      The most important thing is that how these people earn this money to purchase 1100 billion rupees properties in Dubai. Tax evasion is comes after that.

      Most of the people doesn’t have any explanation how they earn money to purchase these properties. It means that their income is not justified.

      Don’t you think that if these 1100 billion rupees would not be escaped from Pakistan, it would really have a positive impact on karachi.

      • paulo

        on   said 

        Are you jealous of the rich taking their money out of Karachi. I am
        not jealous. Like I stated previously — I feel sorry for the author of
        Ghar47 —He want every one to be poorer than him-self — Zahid
        are you a poor man who want to have money from the rich.

        Karachi is the cheapest city in the world and let keep it that way. I
        am not interested in Dubai — Like I stated Rs1 in 1908 what would
        you have done with the property ( I mean your family (not you
        necessary ))

  6. Zahid Ali

    on   said

    Over 7,000 Pakistanis illegally purchased properties worth Rs1.1 trillion in Dubai

    ISLAMABAD: It appears that Pakistan’s super rich have made merry in one of the world’s luxury capitals, away from the prying eyes of their compatriots. The physical distance has long seemed to work.

    For the first time, Geo News can disclose that Pakistanis have bought properties worth an estimated Rs1.1 trillion in the heart of Dubai in the past one-and-a half-decade. Interestingly, the majority of them did not mention these properties in their annual returns and were said to be moving their assets out of the country to avoid being caught in the event of a serious crackdown on this unaccounted for money.

    According to confidential documents available with Geo News, more than 7,000 super-rich Pakistanis bought luxury residential villas, flats, and estates in 12 renowned localities in the Emirati capital. The documents contain particulars of some 34,000 rich families from 118 countries in all.

    Such is the spending spree of these wealthy Pakistanis that they have become the biggest overseas property buyers in Dubai — leaving behind even investors from India, the United States, Britain, and the rest of the world — thanks to the Rs1.1 trillion they shelled out for these properties.

    This list of the who’s who includes politicians, some of whom are members of the Parliament, retired generals, former judges, real estate tycoons, businesspersons, bureaucrats, lawyers, actors, singers, and a few media personalities.

    The startling revelations come at a time when the country’s top court has directed the State Bank of Pakistan, The Securities Exchange Commission of Pakistan, the Intelligence Bureau, Inter-Services Intelligence, Military Intelligence, the Foreign Office and the Federal Investigative Authority to share their information about foreign bank accounts and foreign assets held by Pakistani citizens.

    The State Bank of Pakistan (SBP) and Federal Investigation Agency (FIA) did not officially comment on the issue, restricting themselves to saying, “The Foreign Assets’ (Declaration) Regulation, 1972 was blatantly violated by such investors and not one of them has reported his/her foreign investments before the SBP.”

    An overwhelming majority never disclosed their foreign offshore wealth, thus violating declaration laws governing foreign assets. The authorities admit that a now-dormant investigation by FIA was able to trace only 100 investors in the past two-and-a-half years. The regulators — FBR, FIA, SECP and SBP — failed to question the legitimacy of the transfer of funds to buy those properties and no action has been taken yet.

    Based on investigations over the past four months both in Pakistan and Dubai by this correspondent for Geo News show Aaj Shahzaib Khanzada Ke Sath, an estimated 5,000 Pakistanis bought properties in their names since 2002 while around 2,000 Pakistani nationals owned properties as ‘benamis’. Nearly 5,600 Indians, 887 Canadians, 799 Americans, 400 Britons, 194 Afghans, 332 Australians and 83 New Zealanders also splurged on the high-end property market. The rest came from the 113 countries.

    Pakistanis bought over 967 villas or residential properties in luxury areas of Greens; 75 precious flats in Emirates Hills; 165 properties in Discovery Garden (residential and commercial); 167 flats in Jumeirah Island; 123 residential properties in Jumeirah Park; 245 plush flats in Jumeirah Village; 10 properties in Palm Deira; 160 in Palm Jabel Ali; 25 properties in Palm Juemirah Shorelines; 234 properties in International City; and 230 in Dubai Cilicon.

    The rest of the properties were bought elsewhere in Dubai. Around 200 Pakistanis holding Canadian citizenship, 50 with Australian nationality, and four Pakistanis holding New Zealand citizenship own residential properties in Dubai.

    The base price (lowest value units) of a property in Dubai market is AED1 million and upper-end properties were worth as much as AED15 million, according to some recognised property consultants in Dubai. They claim that the estimated value of 7,000 properties owned by Pakistanis in Dubai totals AED35 billion (approximately, US$9.529 billion or Pakistani Rs1.004 trillion).

    For evaluation purposes, the properties were broadly divided into four categories. Understanding that upper-end properties are lesser in number, the valuation estimates were calculated as 10% high-end properties (700 units) at AED15,000,000 each; 20% upper-mid-level properties (1,400 units) at AED10,000,000 each; 20% mid-level value properties (1,400 units) at AED5,000,000 each, and 50% lowest value properties (3,500 units) at AED1,000,000 each.

    Despite repeated requests officially delivered to them by Geo News, the FBR, SBP, and FIA chose to remain silent on the issue. This correspondent made repeated requests via emails, WhatsApp, and text messages to 1,200 prominent Pakistanis who own properties in Dubai, out of which only eight buyers responded in the past three weeks.

    Similarly, neither the Pakistan mission in UAE nor the Dubai Land Department responded to queries made by Geo News. This correspondent met more than two dozen concerned officials of the FBR, SBP, and FIA in Pakistan and a number of Pakistanis and property consultants in Dubai.

    The said authorities, however, admitted that a large number of Pakistani citizens were found in possession of properties such as luxurious flats, apartments, and other valuable properties worth billions of rupees and the funds were transferred to UAE through illegal channels in violation of Foreign Assets’ Declaration Regulations 1972 and the rules and regulations of SBP.

    “The FIA wrote to (the) Pak(istani) Mission in Dubai on Aug 17, 2015 but no response (has been) received yet. A letter was also written to Dubai authorities through Ministry of Foreign Affairs but no response was received. FIA sought details of Pakistani citizens who purchased properties in foreign countries and declared the same before the SBP w.e.f 1990 till to 2017. SBP officially informed FIA through a letter written on Sep 23, 2015 that no Pakistani citizen intimated about his/her belongings of immoveable properties outside Pakistan under the provision of foreign assets (declaration),” revealed a senior official of FIA overseeing progress on this case.

    He conjectured that funds invested in properties in the UAE and other countries have mostly been transferred through ‘hundi’ and ‘hawala’ networks and thus no money trail can be found for such transactions. Foreign tax administrations were also not cooperating in furnishing full particulars of Pakistani owners of properties within their territorial jurisdiction to Pakistani tax authorities, he added.

    All such persons or individuals who have acquired properties abroad and have not reported those in their wealth statements filed with FBR can be prosecuted criminally under Sections 192 and 192-A of the Income Tax Ordinance 2001 in addition to other penal provisions of the said ordinance. They are also in violation of the provisions of Anti Money Laundering Act for having reportedly channeled their (mostly ill-gotten) money abroad through illegal instruments such as ‘hundi’ and ‘hawala’.

    The Foreign Assets’ Declaration Law reads: “Any person who owns any moveable or immoveable properties, not being foreign exchange, in any country other than Pakistan, shall declare before SBP its description and value and the income derived from it. It [Law] shall all apply to all citizens of Pakistan i.e. any person employed in any capacity in foreign country or a wage earner residing in a foreign country.”


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