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Benami Act implemented by Government

Benami Act implemented by Government:

The government of Pakistan has implemented the Benami Act. As per the law, FBR will confiscate the immovable properties or accounts held on someone else’s name including the relatives. Benami Transactions (Prohibition) Act 2017 was passed by parliament on 1 February 2017 but it was not enforced. As now Benami Act has been implemented by Government, lets discuss its impacts on real estate.

What is Benami?

Benami is a special term used when a person holds assets for the advantage of other person. Benami property and Benami Account are used to park the black money earned by illegal means and also to evade the taxes. In most cases people buy property on the name of their relatives or servants who are owners just on paper. According to FBR, Benami Transactions are the major tool of money laundering.

Why government has implemented the Benami Act?

Pakistani shadow economy is 70% of the real economy as few people pay taxes. The government has implemented the Benami Act due to three major reasons. Firstly, Benami Act will control the illegal practices to hoard properties and wealth as every citizen has to answer about the source of income. Secondly, people will be encouraged to become filers. Thirdly, documented economy of Pakistan will increase whereas shadow economy will decrease.

Awards and punishments under Benami Act

The whistle blowers will be awarded by the government. Three slabs have been introduced to award the people who will indicate the Benami Properties or Benami Accounts. Firstly, whistle blowers who will indicate about the properties of worth up to 20 LAC PKR will be given 5%. In second slab, 1 LAC PKR and 4% property worth will be given to the people who will tell about Benami Property worth up to 50 LAC. In third slab, 2.2 LAC will be awards to the people who will indicate the properties worth more than 50 LAC PKR.

But the people who will provide the wrong information will be imprisoned for 6 months to 5 years. Similarly people who will have Benami Property or Accounts will be imprisoned for 1 year to 7 years and assets will be confiscated.

Who will come under the Benami Act?

Benami Act will be applicable on all properties and accounts held on someone else’s name after 1 February 2017.

Impacts of Benami Act on Real Estate

Benami Act is a new wave of crackdown against black money. Benami Act will firstly slow down the investment of black money into real estate sector. Secondly it will help in cooling down the property prices. Thirdly the genuine buyers with white money will be able to buy properties at affordable rates. According to real estate agents, 40% property price decline will be observed by the end of the year 2019.

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12 Comments

    • Rizwan

      “Market watchers foresee a fall in property prices as benami holders rush to dump their assets in the market to ward off the risk of confiscation”.

      Means selling property at any low rates to avoid confiscation and charges.

      Reply
  1. Muhammad azeem uddin

    on   said 

    Dear Malik sb,,
    Yesterday 17th March 2019, I have visited few estate agent focusing Industrial plot S.I.T.E phase 1 and 2 ahsan abad karachi .. estate agent advise me that don’t buy plot at this time because prices are shoot up from 1.5 crore half acre reach 7.5 crore The reason is that those people have black money and can not hold it in bank they have invested.

    The other residential plot gulshan e Maymer. Garden city of karachi both prices going triple time higher and quite same position and same views of estate agent I mean gulshan e Maymer 400 sq yard plot reach 1.4 crore and it was 1 years ago 60 lakh.

    Garden city 400 sq yard plot reach 80 lakh which was 1 years 30 lakh.

    My question from you
    1) estate agent know black money is investing then FBR did not know?

    2) Do you think situation will become same in future ?

    3) This kind of facility to park black money in plots only in pakistan or any other countries in the world? If yes then who??

    You valuable comments please.

    Reply
  2. rizwan

    on   said 

    Benami Transactions Prohibition Rules enable taxmen to confiscate/dispose property, vehicles and cash
    By Correspondent (customnews.pk) 12-Mar-2019
    KARACHI: The Federal Board of Revenue (FBR) has notified Benami Transactions (Prohibition) Rules, 2019, which would enable tax officers to provisionally attach and/or confiscate properties held in other than owners’ names.

    The Rules have also prescribed rewards for whistleblowers relating to detection and confiscation of Benami property, which may be as much as 5.0 percent of the value of such property.

    Under the Rules, tax authorities have jurisdiction over movable and immovable property including vehicles, cash in bank accounts and investment accounts held in Benami accounts i.e. held in other than owners’ names.

    The Rules define the jurisdictions of Administrator, Initiating Officer Approving Authority and Adjudication Authority pertaining to detect, investigate, and adjudicate cases of Benami Transactions and accounts.

    The tax authorities have been empowered to sell the confiscated properties and issue a direction to the bank or financial institutions to transfer and credit the money to the account of the Administrator, in case the property is in the form of cash in a bank or financial institution.

    The Administrator may establish one or more warehouses for safe keeping of attached and confiscated properties such as vehicles.

    According to the Benami Transactions (Prohibition) Rules 2019, an appeal against the judgement of Adjudication Authority can be made at the Federal Appellate Tribunal.

    Reply
  3. Farooq Lari

    on   said 

    Malik sb.
    I will save this article of yours which states 40% reduction in property price by year 2019. I leave example of Lake City 10 marla plot selling around PKR 70-90 lacs. According to your formula presented since last year, the price should be around PKR 40-54 lacs by end of 2019. Lets see how your prediction goes. I have been a keen follower of your articles and was very positive after reading your market prediction but was left completely shattered when tried to buy 5 marla plot in Halloki Gardens DHA Phase 11. I have waited for past 1 year following your prediction and will wait one more year. Lets see if I am left happy by end 2019 or left heartbroken like I was at the end of 2018.
    Regards

    Reply
    • Farooq Lari
      Estate Agents told me yesterday that BENAMI ACT will massacre the real estate sector.
      I am very hopeful that you will get the best plot at affordable price by end of 2019.

      Reply
      • Ahmad

        on   said 

        I guess the reason is that suppose someone had invested his “extra” money in property 4 years ago in hope that his property price would shoot up.But in current situation price is stagnant or coming down little bit so why that person will sell his property (extra money) in loss or little profit unless he is desperate for money. If I were investor I would never sell property at this time and hold it as long as I can. Prevailing market condition is not technically based on supply and demand. If this condition persists for another 3-4 years than you will see major drop in property price from existing situation otherwise it will be hovering around same price as of today.Just my 2 cents! Cheers

        Reply
        • Ahmad
          All new laws point towards one thing, hard real estate crash.
          Due to depreciating currency investors will loose the money.
          But if they sell now a buy later when prices are low they can still get profit.
          Prices are also falling as there is no investment in reality sector.
          Price is what people are willing to pay. When black money is out then definitely prices crash. This is what happened in Dubai and happening in Pakistan.

          Reply
          • Fraz

            on   said 

            Anwar sb

            Please do not give false hopes to people. No major drop in property prcice will happen unless a global recession will take place same like 2008.

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