As indicated by the Federal Board of Revenue (FBR) in several recent press announcements, and anticipated in full in one of our previous blog posts, the board has proposed new valuation table rates for immovable properties in 18 cities across the country.
These FBR property valuation rates, as they’re properly referred to in the going official parlance, currently, await the scrutiny and revising-suggestions of the stakeholders concerned (with most of them hailing from the real estate sector) till the June 30 deadline communicated – following which they will be considered for countrywide implementation starting July 1.
THE ‘18 CITIES’ IMPACTED BY THIS CHANGE
According to a news source, the FBR has said that it’s draft valuation tables will become applicable from July 1 onwards in various areas and housing schemes of:
You can find the proposed valuation table PDF for these cities, which the board intends to implement from July 1 onwards, on the official website of the FBR.
Also, do bear in mind that these rates are only tentative at the moment.
COUNTERING THE EFFECTS OF THESE RATE HIKES: TAX & RELIEF
In this revised property valuation tables, the rates for determining the federal taxes on the sales and purchases of immovable properties have been increased at varying percentages. In some cases, the rates have gone up by over 200%, but if we compare the FBR’s newly proposed values with the average market price of an affected property, the board’s valuation still falls behind by over 20%.
In an attempt to reduce this difference to 15%, the FBR plans to inch up its valuation rates to 85% of the property’s real market value.
For people familiar with the situation being faced by the real estate marketplace since the introduction of July 2016’s property valuation tables, these new valuation indices may come across as being a bit too much for the sector. Being cognizant of this market predilection, a counter-strategy was proposed by State Minister on Revenue Hammad Azhar in his Budget 2019-20 speech of June 11.
The minister stated that, along with finalizing the plans to increase the FBR’s valuation rates, the government will aim to reduce the percentage of withholding tax imposed on property buyers and sellers from 2% to 1% (the ‘reprieve’ to go along with the tax hike).
THE OLD VS THE NEW
On a telling note, the FBR’s new valuation table drafts for immovable properties do not list any increased rates for Karachi and Quetta.
Now the board may or may not share these details before June 30; but even if it does, the new rates are likely to be higher by 20% to 30% when contrasted with the ones shared in February for these cities.
For the convenience of our readers, we have compared the new property valuation rates for Islamabad and Lahore with those notified in February 2019 in the table below:
|Islamabad||FBR Rates – per sq. yd for residential plots||Percentage rise|
|Sector||Old (Feb-19)||New (July- 19)|
|B-17, C-15, C-16,D-13, D-17, G-15, G-16, F-14, F-15, F-16, F-17||As per district collector’s rates|
When looking at the figures listed for Islamabad, the percentage rise proposed for some areas might appear too much for a lot of people, but that fact remains that the rates notified in the old tables were conspicuously undervalued in comparison with fair market prices. Not to mention that the District Collector’s (DC) rate still remains applicable in various sectors of Islamabad Zone II: B-17, C-15, C-16, D-13, D-17, G-15, G-16, F-14, F-15, F-16, and F-17.
Here is what the FBR’s rate list for Lahore (2019-20) looks like when compared with the one issued earlier this year:
|Lahore||Old FBR Rate Per Marla (Feb 2019)||New FBR Rate Per Marla (Jul 2019)||Percentage
|DHA Phase I||806,400||880,000||9%|
|DHA Phase II||662,400||880,000||33%|
|DHA Phase III||662,400||960,000||45%|
|DHA Phase III Y & Z Block||921,600||1,040,000||13%|
|DHA Phase IV||630,630||1,080,000||71%|
|DHA Phase V||504,000||1,240,000||146%|
|DHA Phase VI||486,000||1,100,000||126%|
|DHA Phase VII||386,000||600,000||55%|
|DHA Phase VIII||378,000||840,000||122%|
|DHA Phase IX||270,000||400,000||48%|
|DHA Phase X||270,000||160,000||-41%|
|DHA Phase XI||270,000||560,000||107%|
(Ferozepur Road to Jhatta Chowk)
|Gulberg Main Boulevard||1,339,200||2,209,680||65%|
|Gulberg I, II, III, IV & V||835,200||1,378,080||65%|
Bharat & Dhoori
|Sui Gas Society (Chung
|Khayaban-n-Jinnah To Raiwind Road
|Raiwind Road (Thokar Chowk to Bhobatian)||324,150||534,848||65%|
The percentage rises for Lahore appear pretty reasonable, especially if you consider that the new rates are still lower by approximately 25% of the property’s fair market price.
WHAT TO EXPECT NEXT
The rates notified in the valuation tables above have to go up – that’s for sure. But will the government wait for the next budget to reveal the finalized rates? Now that is a question which is worth asking at this stage.
It is clear, however, that the stringent measures currently being undertaken by the government are geared towards documenting the real estate sector, increasing the national tax net, and benefitting the stakeholders.