The real estate sector is suffering from a financial crisis, as investors are holding back their funds. Rana Abid, a real estate broker, told WealthPK that the high interest rates and the uncertain situation discouraged investors from risking their money. He said most investors preferred to keep their money in banks and earn interest, or stash it at home. “Currently, I am earning by renting out houses rather than selling any property. Owing to the persisting crisis, scores of people have switched to other businesses,” he said. A couple of months ago, scores of people even started selling their fertile lands perfect for cultivation to private developers and earned handsome amounts. However, this trend has also slowed down, as developers are also not purchasing lands due to the slump. Muhammad Rizwan, who sold his ancestral land to a private housing colony, told WealthPK that he used to cultivate wheat and sugarcane but got a meager amount in return. “After selling the land to a private developer, we purchased some houses and rented them out. Now we are getting a handsome amount monthly through rent and bank deposits,” he added.

“We sold our land about two years ago and it still lies unused, as the developer is not starting any development work due to the market condition,” Rizwan said. Requesting anonymity, an office-bearer of a private developers association said the government’s heavy taxation on property discouraged investors and buyers from entering the real estate market. He said by relaxing taxes, the government could create more jobs, as this sector has tremendous potential to feed millions of people. He said investors are expecting the current government to ease taxes. The real estate sector benefits the national and personal economy, and it employs people of all education levels. However, this sector is being neglected, which has affected the industries of construction, wood, sanitary, steel and many others. “All stakeholders, including developers and investors, are very much perturbed by the imposition of taxes, which has brought the sector to a standstill invoking a sense of insecurity and putting a question mark on its future,” he claimed.

He said before visiting a house, the buyers start questioning about taxes and ways and means to avoid them. In addition to the imposition of taxes, he said, currency fluctuation and political uncertainty had also played an important role in shattering the confidence of investors. Javeed, a private developer, told WealthPK that the World Bank’s report a few months ago had raised the developers’ hopes for the real estate sector of Pakistan, but the situation had worsened. “The government is trying to tax non-filers. It is a praiseworthy step but it should not be done at the cost of filers. Non-filers have to pay 18.5 percent tax in case of purchase of any property and we know better that most investors are non-filers,” Javeed suggested. He said taxes are increasing and the buying power of the people is decreasing, which is hitting the entire business cycle. The government must take a stock of the situation and put the real estate sector back on track. “The real estate prices are very high due to the imposition of taxes. It is due to this factor that neither new nor old buyers are ready to invest,” he added. “We urged overseas Pakistanis to invest in the real estate market, as the exchange rates made the properties more affordable for them. However, they did not trust us because of the instability here,” Javeed added.

Credit: Independent News Pakistan (INP)