ISLAMABAD: The high-profile Economic Advisory Council (EAC) has recommended the 2021-22 budget makers to discourage land investment and encourage construction, higher tax rate for land investment and refund substantial part of taxes collected on land investment at time of construction.
It also asks for granting exemption from providing reconciliation of wealth by the end buyers of real estate, who made payments through banking channels up to Rs50 million.
The EAC also recommended granting extension in timeframe for the amnesty scheme of the construction sector beyond June 30, 2021.
In order to promote the construction sector in the upcoming budget, the EAC recommends dedicated benches at courts for speedy dispute resolution – Implementation of Financial Institutions (Recovery of Finances) Ordinance 2001 and Foreclosure Law. They recommended exemption from providing reconciliation of wealth by the end buyers of real estate who acquire through registered instruments with payments made through banking channels up to Rs50 million.
So far, more than 1,070 projects with an estimated worth of Rs383 billion have already registered with the FBR for availing amnesty scheme for construction sector.
They asked for reduction in Sales Tax on goods and services to 5% and Withholding Tax to 1% (currently 8.5%). It is recommended for continued availability of finance for developers, contractors and end-buyers.
The EAC also asks for establishment of national regulator such as the Real Estate Regulatory Authority (RERA) for providing one-window facilitation.
The EAC recommended for launching master planning of all cities with population of at least three million and launching of government sponsored projects offering land with clear title and clean possession.
There is a need for setting up a think tank to research latest technologies, especially green technologies. The EAC recommends attracting housing finance companies and setting up Pakistan Housing Bank in due course of time.
The banks’ housing and construction finance portfolio has increased from Rs148 billion by the end of June 2020 to Rs202 billion in March 2021.
This represents a growth of Rs54 billion, or 36pc, in three quarters of FY21 compared to a stagnant position in the same period last year.
As of April 20, 2021, the banks have received applications for financing of more than Rs52bn from the general public under this scheme.
Of these, the banks have approved financing of more than Rs15 billion to the applicants while the remaining applications are at different stages of the evaluation and approval process.
To provide oversight and direction, the prime minister holds a weekly meeting of the National Coordination Committee (NCC) on Housing, Construction and Development for considering revised master planning across the country, placing transparent regime of regulatory approvals for land use, master planning, sale NOC, construction approvals, transfers and completion certificates etc and secured system of easily verifiable land titles, timely availability of utilities, availability of trunk infrastructure, removing obstacles and bottlenecks impeding the implementation of construction package and facilitation to bring this sector in the formal fold.
There is a need to promote Real Estate Investment Trust (REIT) for documentation and Capital Gain Tax exemption on sale of property to REIT should be provided as it was available till June 2015, dividend tax on REIT units should be on a par with Mutual Funds i.e. 15% and lower tax rate over and above ten times of fixed tax (from 29% to 15%) – Section 100 D.