FBR Revises Property Valuation Rates by Up to 80% in Pakistan
- Abeera Marium Siddiqui
- October 31, 2024
- 12:23 pm
- 24
- Current Affairs
The Federal Board of Revenue (FBR) has raised property valuation rates by up to 80% across 56 cities in Pakistan. This change, effective November 1, 2024, affects residential, commercial, and industrial properties. The goal is to bring valuations closer to market rates, increase tax revenue, and discourage speculative investments.
Expanded Valuation Coverage
The new rates add 12 cities to the list, including Bannu, Chiniot, and Kotli Sattian, bringing the total to 56 cities. According to FBR Chairman Rashid Langrial, “the valuation rates were moderately revised upward.” The updated rates consider property type, location, and other factors. The FBR aims to close the gap between actual property prices and declared values, which has cost the government heavily in taxes.
Compliance Measures and Enforcement
Starting November 1, all property transactions must follow these new valuations. These updated rates will affect taxes like capital gains tax (CGT) and withholding tax. Unlike many countries that base taxes on transaction values, Pakistan uses FBR-set valuations. Langrial has warned that stricter enforcement will follow, noting that “the prime minister has directed that no tax evaders should be spared.” Restrictions will apply to non-filers in property transactions, vehicle purchases, and international travel.
Revenue Boost and Investment Shift
The valuation hike aims to increase tax revenue from property transactions, which generated Rs150 billion last year. The FBR expects a revenue boost and a shift in investments from real estate to other economic sectors. Property transactions in several housing societies have already slowed due to the new rates, as investors proceed cautiously.
Tackling Tax Evasion in Real Estate
Underpricing property transactions has fueled tax evasion for years. The FBR is now tightening compliance by setting property valuations closer to market prices. The crackdown on non-filers will continue. The agency holds “complete data on non-filers” and has identified tax evasion in sectors beyond real estate. Finance Minister Muhammad Aurangzeb estimates that Rs3,400 billion is lost annually to tax evasion.
Impact on Real Estate and the Economy
The valuation adjustment has already slowed transaction rates in certain housing markets, but it could lead to a healthier balance across Pakistan’s real estate sector. By setting property valuations closer to market prices, the FBR is establishing a fairer tax system and promoting transparency. Economically, the move could also help channel funds into more productive sectors, fostering sustainable growth.
Final Thoughts
The FBR’s property valuation hike reflects a commitment to increase tax collection and combat tax evasion. By reshaping property valuations, the FBR aims to build a more transparent and equitable tax system, potentially leading to a stronger economy as funds move to diverse sectors.
