Prices of expensive properties are falling faster
Pakistan real estate sector is passing through slump phase, which is getting worst with the passage of time. Present slump in reality sector of Pakistan started with the property tax bill 2016. Taxes were increased in the tax bill 2016 and new property valuation tables were introduced by FBR. After the property tax amendments, prices are falling in every city of Pakistan.
But billion dollar question is that what sparked the property crash? Taxes are not the major cause of falling prices in Pakistan as taxes are even higher in Europe but prices are still rising. The law that crashed the property market in Pakistan is the one that has allowed FBR to ask the source of income. This law was solely introduced to flush out black money from real estate sector and to bring undocumented economy to tax net.
Luxury property was the market of black money
The average Pakistani has very low purchasing power. According to IMF, per capita purchasing power of Pakistan is 5 Lac. So average Pakistani cannot buy expensive property. The professional middle class of Pakistan has also low purchasing power and can buy properties worth more than 1 crore rupees. But expensive properties like 4-10 crore rupees were bought by businessmen or people with black money in Pakistan. In history of Pakistan, expensive properties were the best tool to whiten the black money.
Now black money is blocked so luxury property prices are falling
FBR has now blocked the flow of black money into real estate sector as FBR is asking the source of income. This is one of the major reasons of declining property prices in Pakistan. The expensive properties (both residential and commercial) in Pakistan have so far seen biggest price fall as it’s hard to find buyers for these properties with white money.