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Impact of Benami Assets Confiscation on Real Estate Market

Impact of Benami Assets Confiscation on Real Estate Market

Pakistan Tax Amnesty Scheme 2019 expired on 3rd of July 2019. FBR has started to confiscate Benami Assets in form of Benami Bank Accounts and Benami Properties. This was the usual practice in Pakistan to buy Benami Properties on name of relatives or servants to conceal ill-gotten money. This blog describes the impact of Benami Assets confiscation on real estate market.

Pakistan Real Estate Market Situation

Pakistan property market is almost dead since the announcement of budget 2019-20. Many property tax laws were amended. There are no investors in the market. Even it is hard to find buyers to sell properties. Only people who need to build homes for living are buying plots and houses. Property transactions are record low. Just 3-5 file transfers in DHA Lahore this week. The new property laws have diverted the investments away from real estate sector. But at the same time genuine buyers are very happy as prices are falling and they have many options.

Impact of Benami Assets Confiscation on Real Estate Market

Benami Properties were bought in past to park the black money. This practice artificially increased the property demand due to which property prices also increased. Now government has started the ruthless accountability process. So no one is buying the benami properties as government will confiscate in future. This has totally changed the scenario of real estate market. Once Pakistan Real Estate sector was famous as safe haven for black money but now it is just for the genuine buyers as prices are falling day by day.

What is in store for Pakistan Realty Sector?

Property Market has changed forever due to budget 2019-20 property tax-amendments and enforcement of benami act. Speculation has ceased to exist as transactions are record low. The only buyers in the market are who are buying plots or homes for living to avoid high rents. Many estate agents claim that property prices in Pakistan will see 50% price decline by the end of 2019. If investors are in panic to divert their investments, genuine buyers have seen a big relief.

Recommended:
Budget 2019-20 Pakistan Property Tax Amendments

42 Comments

  1. Hasan

    on   said 

    The country is going through a fundamental restructuring. And it’s for the good. Despite all the noises, strikes, shut downs, etc.

    Over the decades people had become used to living & doing business ultra vires of law. The law for its part also became complicit with the negative forces in society. Total chaos ensued. Individuals became rich while no real improvement in general quality of lives occurred.

    Most bemoaned the bad ‘System’ while unwilling to change on a personal level.

    However, in all that negativity a certain type of life was still progressing. E.g. A smuggler providing goods to middlemen or retailers, would still hire a moving service, a driver, a cleaner, an office boy and pay them. The good and the bad got mixed up. Negative forces at lower, middle, and upper ends would justify their tax evasion on grounds that government would waste it all anyway.

    Black or grey money grew and most popular investment happened to be property.

    It didn’t happen overnight. Took decades. Property is of course expensive everywhere. But under a good ‘System’ the prices correspond to legal incomes of general population such that they are able to afford appropriate houses. Such was the case in Pakistan too (up until the 1980s) that an honest college professor or ordinary office worker was able to buy a decent home for family with white money after about 15-20 years of service.

    Thereafter the bad System grew stronger. Property prices rose exponentially since black or grey money overshadowed the white money buyer. A peak was reached over last few years … and then the entire bad system started crumbling.

    Now there is course correction for the good after a long time. This is the fundamental restructuring / a re-boot …. i.e. everyone must declare incomes, pay taxes due, rely on legally imported goods, indulge only in legitimate businesses, provide CNICs, not remain hidden behind Benamis, and all the works.

    Obviously, it’s affecting property in a major way. Feverish trading amongst grey money people or parking ill-gotten money can’t happen thus eliminating biggest drivers of property prices. Most black & grey money people were under the impression that things would always remain this way since how & why would a thief catch a thief.

    They were wrong.

    Things are changing. Negative forces had forgotten that God does not rely on human barriers to bring about changes in lives of nations. Pakistan is going through a tough time but it’s changing for the better.

    Reply
    • Ahmad

      on   said 

      Hasan
      You summarize the whole situation in beautiful way. Individuals are getting stronger than state because of the existing system. Its now or never scenario for Pakistan.

      Reply
    • Hasan
      You have explained the current real estate market situation is very simple words.
      Pakistan real estate sector thrived on black money so prices were abnormal.
      Now white money will dictate the realty sector so prices will be much affordable.
      A big relief for genuine buyers.

      Reply
  2. Ali

    on   said 

    Hi.
    I have only one question, when property prices will go down? I have been waiting since 2008 to wish to buy a small home 120 yards in Karachi , but price are sky rocket.

    Reply
        • Ahmad
          Property prices are falling day by day.
          Interest rate is the single most important factor that increases or decreases property prices.
          With another increase in interest rate, Benami Property confiscation and Capital Gain Tax are enought to bring property prices at record low in Pakistan.

          Reply
  3. Hasan Memon

    on   said 

    SIR,
    one of my friend who work in a big real estate company told me that the price of DHA city karachi 1000 sqyard plot or 2 kanal pick price was 300 lakh, but nowdays it is available 140 lakh, similarly 120 sqyard plot or 5 marla price was 45 lakh but nowdays it is 25 lakh even very hard to find out buyer.

    in DHA phase 8 karachi plot 500 sqyard or 1 kanal price was 8 crore and brand new bunglow was 11 crore but nowdays it is available plot 5 crore and brand new bunglow 7 crore.

    he is also saying that property prices will come in the same price of 2013 when nawaz sharif govt taken, according to him at 2013 plot 500 sqyard DHA phase 8 karachi was 1.5 crore and it taken pick price 2018 about 8 crore. so he is saying the plot price will come at the level of 2 crore.

    now i will request to you would you think my friend is saying right or wrong.

    my friend said the their is reason to come down price
    1) the bank interest rate is reaching 14% very soon, so if any one will invest money in bank they money will be double after 5 years but property would not be increase in that ratio.

    2) who will buy property when people dont have saving, soaring prices of utility bills, foods, petrol, and other all expenses are rising sharply, so first priority to manage it then investment, so no saving no investment.

    Reply
    • Hasan Memon
      Your friend has told you the truth.
      Definitely interest rates are inching towards 14/16%.
      Banks are giving more profits on fixed deposits. This is why people are investing in banks than properties.
      Real estate has lost the magic as Capital Gain Tax Law and Benami Property Crackdown has ended black money investments.
      I know many people who have sold properties and invested in banks.
      They say property prices will rise after 4/5 years.
      They have sold properties at high prices.
      But will buy properties when prices will be record low.
      INTELLIGENT MOVE INDEED.
      In short property prices will keep falling unless they find support in form of high purchasing power which is not possible in near future.

      Reply
    • rizwan

      on   said 

      you are absolutely right brother…aisa he hona hai…bus countdown has started….real estate mafia is in panic as shabbar ziadi nay bhi unki demands nai mani….and any one who will park black money in property will get arrested and prosecuted by govt..even non filers cannot buy property because agar buy karingay tu unko filer banna parayga and unkay khilaf qanooni action bhi hoga…prices will crash and keep on crashing like dubai

      Reply
  4. Nazish Fatima

    on   said 

    Dear Anwar bhai,

    Thank you very much that your blog is very informative.

    my question is from you that it is i always meet many people , like shopkeepers, businessman, real esate brokers, as well, but i am very strange that all people have same opinion except Real esate broker. i mean all people says that their is very bad situation of business, income have shrink, USD reaches RS158 this leads all goods prices expensive. it is very hard to manage home expenses.

    But Real esate broker said that property prices increase or stagnant, but property will increase just after three of four months.People have enough money to buy plots, this is the reason the market is not going down.he challenge me that i should visit market and is their any property is available lower prices then he is ready to buy it.

    i also strange that majority people is saying that they are not making money then who is the buyer ?

    so who is saying wrong and who is saying right.

    Reply
    • Fraz

      on   said 

      Overseas Pakistanis and local businessmen are buyers.

      Now the purchasing power of overseas pakistanis is increased by 50 percent in just 1 year. They are now waiting for the stability of pakistani rupee

      Property price increase will depend of economic situation of pakistan. But i am not seeing any decrease in property prices in near future except if there will be global recession like 2008

      Reply
  5. Muhammad azeem uddin

    on   said 

    Dear Malik sb,
    Kindly clear this point that

    1) you are saying investor are deposits money in bank getting 11% profit per annum. But as you told most investment comes from BLACK MONEY in real estate , then how investor deposits money in bank.

    Bank ask source of income?? Black money can not park in bank, Prize bond also.

    If I talk about Karachi,, a 500 sqyard bungalow price range 5 crore. If I talk about white money then I think only active tax payer is 8 lakh, so try to find out buyer , hardly 5000 person hold white money 5 crore. And may be all have their own home and no need to buy second home.

    It means either property will not sold due to lack of buyer or seller will wait.

    If this formula works then still their is no market slow down till today.

    Kindly explain your views and analysis.

    Reply
    • Muhammad Azeem Uddin
      Investments in real estate has greatly decreased. Reason is the low profit due to declining property price.
      Where investors are interested. Stocks and Banks.
      Yes definitely people have to show the source of income either they invest in stocks, banks or real estate.

      Reply
  6. Muhammad azeem uddin

    on   said 

    Dear Malik sb,
    Kindly share the information about DHA Lahore that every day how much files are being transfer and compare from its pick time.

    Secondly you are saying investor are shifting their investment from property sector, can you share any information investor where are investing money?

    Reply
    • Muhammad Azeem Uddin
      In peak times like 2016, there were 180-200 daily file transfers in DHA Lahore. Whereas under 10 daily file transfers now.
      People are now depositing money in banks because banks are offering 10/11% annual profits.

      Reply
      • Fraz

        on   said 

        We are talking about fall in property prices which is not happened from many years as perdicted by you again and again.

        Meanwhile, economy fell down not property prices.

        Reply
        • Fraz
          Property owners are begging the dealers to sell their properties at loss. Property prices have already dropped by 30% since 2016 peak.
          A Home owner wanted to sell property at 180 LAC on 25 June 2019. Today he is desperate to sell at 160 LAC.
          This is the market situation. Things have changed in 3-4 weeks.

          Reply
      • Fraz

        on   said 

        Anwaar
        Please give some names of societies in lahore where property prices are decreased. I will definitely avail the opportunity.

        Reply
          • Fraz

            on   said 

            Anwaar

            No on-ground plots and house price decrease in these societies from many years of your speculations.

            There is a slow upward trend in these societies.

            No relief. Just speculations. Economy overall crashed not property prices.

  7. aziz ahmed

    on   said 

    Banks are paying up to 11% on various investment funds for example Allied Bank all cash fund is returning just over 10%. If you have 3 crore this will return you 30 Lakhs over 12 months if you put same money in real estate you could lose up to 50% over next 12 months.
    Who in their right mind is going to invest in real estate unless one buys to live in?

    Reply
    • Aziz Ahmed
      EXCELLENT. This is what most people have failed to understand.
      Now only genuine buyers are in the market who want to buy plots or homes for living. Those who want to get rid of high rents.
      Otherwise investment in real estate sector has ceased to exist.

      Reply

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