On June 7, 2022 at the Business Conference in Islamabad Prime Minister Shehbaz Sharif revealed his government policy about real estate sector. He indicated mainly two measures; first levying taxes on real estate in the upcoming annual budget and second his encouragement for vertical construction to spare land in Pakistan.
The Conference was more a pre-budget seminar, where he called for enhancing exports and agricultural yield, besides financial management as the major components of his economic plan. The Conference was attended by agriculturists, information technology experts, businessmen and investors from across the country, who shared their proposals with the government related to their respective areas.
Taxation on Real Estate
In the Conference PM Shehbaz Sharif dubbed real estate as a “non-productive” sector which is being used only for speculative purposes rather productive means. He called that speculations a “disservice” to the country. “Land remains vacant (without any construction activity) and after two years the prices increase (to make profit), please stop this practice” says Prime Minister. Therefore he revealed that the government is going to levy tax on real estate to stop this trend.
Calling for the elite to sacrifice, Shehbaz Sharif hinted at taxing the real estate sector, but as a matter of fact, the government primarily aims at a sizable revenue collection via taxation in the fiscal budget to meet targets given by International Monetary Fund. However, the PM also said that if someone utilizes land for productive purpose the government should give him incentive and a mechanism can be devised in this regard.
Prime Minister also revealed his encouragement of vertical construction to spare land for agricultural use. He said land is a scarce asset around the world which cannot be increased. “All over world there is one thing which is limited and that is land. You cannot increase land or how much land you can reclaim from sea. There is a limit”, speaks Shehbaz Sharif. He also told that especially for public services the land is very limited. Therefore Pakistan should discourage horizontal development and shift toward vertical development following the model of Turkey, China and other European countries.
According to him small and medium high rise buildings are solution of land scarcity. He hinted to incentivize vertical construction, which can spare land for agriculture and ensure food security. However, the PM also maintained and called for providing modern facilities to villages to uplift the living standards of the people and discourage massive urbanization.
A Shift in Real Estate Policy
In contrast to Shabaz Sharif views, his predecessor Imran Khan had given the real estate sector a blanket amnesty to whiten black money, or what his government would say was to give a boost to the construction business after COVID-19 shutdowns hit economy hard. However many believe, the PTI’ undue projection of the real estate sector killed small and medium industry and discouraged the business community to invest in trade and markets.
At the moment growing inflation and economic instability are major challenges before the government. In such scenario would the government cope up the pressure of real estate fraternity if it levy taxes on real estate without taking major stakeholders in confidence? It is to see.