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Pakistan Mini Budget 2019 and Property Market

Pakistan Mini Budget 2019 and Property Market | Impact of Mini Budget on Pakistan Real Estate Sector:

On 23rd of January 2019, Pakistani Finance Minister Asad Umar presented the Mini Budget 2019. Asad Umar has termed this as a package to reform the economy of Pakistan. The budget has been hailed as business friendly by many economists and welcomed by the traders. Let’s discuss Pakistan Mini Budget 2019 and Property Market.

Salient Features of the Supplementary Finance Bill 2019:

Non-filers can buy property worth only up-to 5 Million PKR (no changes in property taxes).

Rs. 5 Billion fund to be allocated to provide interest free loans for the construction of small homes.

Special economic zones will be formed for CPEC.

Non-filers can buy cars up-to 1300cc but with increased tax.

Duty on cars above 1800cc fixed at 25 per cent.

30% tax imposed on mobile cards.

Taxes on low priced phone will decrease but on expensive phones will increase.

Withholding tax on banking transactions (deposits/withdrawals) abolished for filers.

Tax reduced from 39% to 20% on loans for small businesses, low income housing and agriculture sector.

Advance tax on stock exchange members abolished.

Income tax on small marriage halls up to 500 SQ FT reduced from Rs. 20,000 to 5,000.

5 years income tax immunity on investing in Greenfield Projects.

Investment in solar-energy projects exempted from taxes.

Taxes reduced for many raw materials.

Super tax on non-banking companies to be abolished from 1 July, 2019.

Pakistan Mini Budget 2019 and Property Market; IMPACT:
MARKET FORECAST:

The government has maintained the restrictions imposed in Mini Budget 2018 for the Non-filers who can’t buy property worth more than 5 Million PKR. High end luxury real estate is the real victim as it’s hard to find a filer buyer. Real estate transactions will remain subdued for the years to come. The level seen in 2016 will repeat only in 2022 or beyond. But small scale properties under price 5 Million PKR will have strong demand due to better affordability.

The property buying restriction for non-filers, government’s property buying back scheme, penalty to handle transactions of non-filers and restriction for overseas Pakistanis to send money within 60 days of property transaction has already crashed the real estate market in Pakistan. The government wants to convey a simple message that buyers and sellers have to show the source of income.

PROPERTY PRICE FORECAST:

Pakistan Real Estate Property Prices are already sliding due to low investments and high interest rates. Prices are down by 35% from the peak of 2016. Real Estate Agents expect another 35% price fall from peak of 2016 or 50% price fall from current level as there are no buyers in the market and property transactions are record low. This price forecast is realistic as Dubai property prices have already crashed by 75% since 2008 and another 5-10% price fall is expected in 2019. The abnormal property prices in Pakistan and Dubai were only due to the massive black money investments. Without easy flow of black money, no one cash stop the crash. Property prices observed in 2016 will be seen again only in 2022 or beyond when buyers affordability will increase due to the rise of Pakistani Economy.

RECOMMENDED:
Pakistan Real Estate Forecast 2019

28 Comments

  1. A. Munir

    on   said 

    In Pakistan real estate was turning into a stock/Forex like market with rates changing each hour of a day. Why? Thanks to “file system” that could change hands in minutes. Further black money was parked in real estate. Let’s divide properties into two groups: 1) Developed properties with possession available 2) Undeveloped properties, yet awaiting balloting and development. The second type of properties are the worst hit as there is no on ground plot to utilize. I hardly observed significant drop in the prices of first type of properties. Their price marginally reduced in areas where supply is high. The drive against illegal housing societies is creating shortage of supply and increasing prices in legal societies. Real estate is a long-term investment and this is best time to buy well located properties because prices are down and upcoming demand for housing in few years is really large. DHA, Bahria and others alike don’t represent real prices of real estate market in Pakistan as they always had manipulated and highly inflated prices using different tactics.

    Reply
  2. Ahmad

    on   said 

    Malik SB,
    FBR has revised tax rates on immovable properties yesterday. My question from you is that these revised rates will impact on buyer or seller? Please advice.
    Thanks

    Reply
  3. Uzma Ali

    on   said 

    Malik sb
    Asad Umar has presented budget on purpose. Relief for Stock Exchange and auto industry but no relief for property sector.
    He wants to divert investment from real estate to car manufacturing industry and stock market that create millions of jobs.
    Now no one can save property sector from complete destruction.
    Only fools will invest in real estate sector after Mini Budget 2019.

    Just note my words; “In few months people will loose their life investments due to big property price fall in every major city of Pakistan”.

    Reply
      • RIZWAN

        on   said 

        FBR HAS INCREASED THE FBR VALUES ALSO AS NOW U NEED MORE WHITE MONEY TO BUY A PLOT OR HOUSE…HOW WILL THIS EFFECT THE MARKET…DAWN NEWS WAS SAYING THIS WILL LEAD TO COLLAPSE OF MARKET

        Reply
        • RIZWAN
          Price crash is already underway. State Bank of Pakistan has recently reported 15-25% price fall since April 2018. This price fall is different in different regions.
          The latest developments are very discouraging for real estate investors. No relief for property sector, instead we can see major tax changes for stock+share market.
          QUICK IMPACT OF POLICY SHIFT is PIA Shares rise.
          So government policy is to divert investments from real estate sector to stocks or auto industry.
          REAL ESTATE SECTOR WILL REMAIN SUBDUED IN PTI RULE.
          Prices will keep falling.

          Reply
  4. Zahid Ali

    on   said 

    Yesterday (23rd January 2019), in “2 tok” program, the senior anchor Ghulam Hussain were saying that in next budget, government will lift the ban on non-filer to purchase a property of worth more than 5 million.

    Reply
  5. Nadeem Zahar DHA Dealer

    on   said 

    We dealers paid heavily in Election 2018 for PTI victory.
    I paid 20 Lakh for Imran Khan. All dealers were hopeful that PTI government will provide relief for real estate sector. But Asad Umar is real brother of Ishaq Dar.
    Now more dealers will end offices in DHA lahore due to FBR/NAB inquiries about source of income. Already buyers are very less in the market.
    Asad Umar thanks for destroying property sector forever.

    Reply
  6. Malik sb Dubai is not comparable to Pakistan as that was investment of international investors and black money. I do not prices any decline in property prices.
    In fact, you are repeating same example but nothing happened yet. No reduction in property prices since 2016. Please let us know specifically the name of area where price was decreased by 35%.

    Reply
    • Fraz
      Why property prices fall or rise?
      Simply the most important factor that has huge impact on property prices is the level of investments in reality sector.
      LESS PEOPLE BUYING PROPERTY IN DUBAI,; PRICE FALL
      LESS PEOPLE BUYING PROPERTY IN LONDON DUE TO BREXIT; PRICE FALL
      Why investment is low in Pakistan reality sector;
      1- High interest rates
      2- Crackdown on black money
      WHEN PROPERTY PRICES WILL INCREASE?
      When the purchasing power of filer buyers will increase
      plus
      When FBR/NAB will stop asking about the source of income
      These things will not change in near future so prices will remain low for years to come.

      Reply
    • Jabbar

      on   said 

      Can tell you about DHA Karachi, plot that was being sold for 14 crore 6-10 months ago now sellers are asking 12 crore and are not even being able to sell for 10-11 crore. Any deal if being materialize is not above 9-9.5 crore. Of course estate agents are trying their best and giving 30%-40% higher rates on internet/property websites or if you ask them, as majority of them have also become investors in real estate and are now badly stuck.

      Reply
      • Rizwan

        on   said 

        Totally agreed …brokers are over inflating prices while very few deals r done in market … and yes brokers were claiming the deal is done with govt but no such releif is given …brokers were just doinng fraud statements with ppl

        Reply
      • Jabbar
        I know few agents in DHA Lahore. Started as simple poor guys in late 90’s and earned huge wealth. But as they became investors, have lost all their savings including cars and homes.
        This is the biggest issue of estate agents, instead of working as brokers they become investors.

        Reply
        • Maliks sb, you many good agents in DHA. can you connect me with someone who wont inflate prices unreasonably and help me get a good deal? i am looking for plot in phase 8 proper.While following the market for so long, i do not see any price decline there despite expectation was that market will crash after filer restriction and FBR activation.

          Reply
          • Umer
            Dealers are spreading the rumors which have proved wrong. Dealers are desperate to show that market is ok by inflated asking price. Otherwise go to DHA Office in DHA Phase 6 Lahore and see the number of transactions.
            The real indicator of DHA Lahore Market Situation.
            There were nearly 200 daily filer transfers in 2016 but now under 20. Even some days just 5-7.

          • Agree that transactions have dropped significantly but that’s not the only indicator. Flip side is that sellers are not ready to sell their properties on lower rates therefore transfers have dropped. Market is stagnant but it hasn’t crashed. Prices are not going down and brokers are doing everything to keep the momentum. One more thing, you say brokers are closing offices and yet they are still trying to inflate the prices? These two things can’t happen at same time. I believe they would try best to convince sellers to sell at lower price before they have to shut down their businesses. If transfers are not taking place, means sellers have holding power and not lowering their demands which indicates that market hasn’t crashed yet.

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