KARACHI:
The recent budget proposal by the Pakistan Tehreek-e-Insaf (PTI) government for FY21 has sparked a significant conversation, particularly concerning the real estate and construction sector. With reduced taxes and specific allocations aimed at this industry, the government is attempting to stimulate economic growth and generate job opportunities. But does this budget really hit the mark?
Federal Minister for Industries and Production Hammad Azhar has emphasized that the government is providing relief on taxes for the income derived from selling immovable properties. Notably, if you buy property and decide to sell it after four years, you won’t face any taxes on the income generated from that sale. This is a change from the previous eight-year rule, making it easier for buyers to manage their investments.
Additionally, there are planned reductions to the capital gains tax (CGT): it will decrease by 25% each year. For example, if the profit is over PKR 20 million in the first year, you face a 20% CGT; if it’s below that, expect a 15% rate. While these measures seem to favor sellers, critics like Shaban Elahi, the President of the Pakistan Real Estate Investment Forum, argue that this relief is skewed towards developers rather than actual homebuyers.
The government has also introduced an impressive Rs30 billion subsidy to assist the Naya Pakistan Housing Authority, which aims to provide affordable housing for lower-income citizens. Alongside that, Rs1.5 billion is allocated to the Akhuwat Foundation, supporting interest-free loans for house construction.
However, not everyone is convinced that these measures will effectively stimulate the economy. There’s a general consensus among some industry experts that overseas Pakistanis, who contribute significantly to the real estate sector, deserve a one-time waiver on source of income inquiries, just like the builders are receiving.
Meanwhile, there’s been notable silence regarding potential tax changes for the stock market, which many believe is crucial for reviving investor confidence. The Pakistan Stock Exchange (PSX) had proposed adjustments to the CGT on stock sales, but these haven’t materialized in the budget.
In summary, while the PTI government seems focused on the construction industry as a growth engine, it also faces criticism for not doing enough for buyers and the stock market. As the economy slowly recovers from the pandemic, it’s essential for the government to find a balanced approach that benefits all stakeholders, especially in these challenging times.
