Special Report
ISLAMABAD: Leading Islamabad-based real estate developers, under the Islamabad Developer Association, have voiced serious concerns over the Federal Board of Revenue’s (FBR) latest move to raise property valuation rates in 56 cities across Pakistan, effective November 1, 2024.
According to Sardar Yasir Ilyas Khan, President of the Islamabad Developer Association and former President of the Islamabad Chamber of Commerce and Industries, the revised rates could potentially destabilize Pakistan’s real estate sector and intensify capital flight.
Sardar Yasir emphasized the far-reaching impact of these policy shifts on the industry and its approximately 60 allied sectors. He highlighted that although the FBR’s intention may be to address fiscal constraints and fulfill the International Monetary Fund (IMF)’s requirements, raising property valuation without industry input could harm Pakistan’s fragile economy and place further strain on the business environment. He noted that the fiscal deficit currently hovers around 6% of Pakistan’s GDP, amounting to a substantial Rs.7 trillion, and called for collaborative dialogue between the government and industry stakeholders.
He stated, “The government’s policy decisions are directly impacting investor confidence and the continuity of business activities. While raising valuation rates may seem like a revenue-boosting measure, it risks becoming counterproductive, as businesses are already grappling with high taxes.”
Sardar Yasir proposed an alternative approach to support economic stability and growth, suggesting an expansion of the tax base rather than targeting an already tax-burdened segment of the economy. He argued that involving the business community in policy decisions would yield better outcomes for both revenue collection and economic stability. This viewpoint aligns with the broader business community, who view engagement with the FBR as essential to balancing revenue targets with the stability of the sector.
One major challenge the business community faces, according to Sardar Yasir, is the rising trend of capital flight. Pakistani investors have contributed approximately USD 11 billion to Dubai’s real estate market alone, placing them as the second-largest investor group in the United Arab Emirates. Many other countries, including the UAE, Singapore, Hong Kong, and Malaysia, attract Pakistani investors due to their lower tax rates and favorable returns on real estate.
In addition, Sardar Yasir highlighted the business community’s frustration with unresolved sales tax adjustment refunds worth billions of rupees, which have eroded trust between the FBR and businesses. The imposition of double taxes on late filers further discourages compliance and deters others from entering the formal tax system, he said.
The Islamabad Developer Association has warned the government that continuing without meaningful industry engagement could undermine growth and drive capital away from Pakistan’s real estate sector. A balanced approach to tax policy, achieved through ongoing dialogue, is essential to mitigate risks, support economic stability, and maintain investor confidence during these uncertain times.
