Ayesha Saba

The Federal Board of Revenue (FBR) plans to raise property valuation rates by up to 75% nationwide, aiming to increase tax revenue. However, real

estate experts have expressed concern that this abrupt hike could destabilise the market, potentially discouraging investments and slowing down transactions. Speaking to WealthPK, Khawaja Umair, marketing head of Rawaha Real Estate and Builders, a private developer and builder, said that the real estate sector, which is playing a crucial role in the national economy, thrives on investment flows, both domestic and international. “A 75% increase in property valuation rates would lead to higher taxes on property transactions, making buying and selling properties more expensive, discouraging potential investors, particularly in a market already experiencing inflationary pressures, high interest rates and an uncertain economic environment,” he feared. Umair argued that when property prices were pushed up due to increased tax liability, potential buyers might delay their investment decisions, anticipating further market correction. “This decline in demand could create a cycle of stagnation, ultimately harming the broader economy.”

He emphasised that any changes should be carefully considered and phased in gradually to allow the market to adjust. “The real estate sector is interconnected with various industries, including construction, banking and manufacturing, and is highly sensitive to government policies. The government should engage with industry stakeholders to gather insights and formulate a more balanced approach that considers the long-term health of the market rather than focusing solely on immediate revenue generation.” An official of the finance ministry told WealthPK on condition of anonymity that the FBR’s primary goal of raising property valuation rates was to improve tax collection by aligning property assessments with market realities. “Currently, many property transactions in Pakistan are conducted based on underreported values, resulting in significant revenue losses for the government.”

“By increasing the official valuation rates, the FBR aims to curtail tax evasion in real estate dealings, boost government revenue, and promote transparency in property transactions,” he said. He said that the valuation increase was necessary to bring the real estate sector in line with actual market conditions. “It will reduce the room for under-declaration and enable the government to capture a more accurate portion of taxes owed on property transactions.” According to the FBR sources, property valuations have been determined for 42 major cities across the country, and the revised prices have been finalised. A notification regarding the new property valuations is expected to be issued soon. The valuations have been determined based on fair market value and location. In the next phase, the new property valuations for an additional 15 cities will also be included in the list.

Credit: INP-WealthPk