Islamabad: In a significant update, the Federal Board of Revenue (FBR) has revised property valuation rates across 56 cities, increasing them by up to 80%. This change, effective November 1, aims to align property values more closely with market rates, enhance revenue collection, and redirect investments into more productive sectors of the economy.
Key Changes in Valuation Rates
- New Cities Added: The recent revision includes 12 new cities, such as Bannu, Chiniot, Kotli Sattian, and Ghora Gali.
- Moderate Increases: FBR Chairman Rashid Mahmood Langrial noted that the increases were “moderately revised upward,” taking into account property type and location.
- Previous Revisions: This is the fifth adjustment since 2016, with earlier revisions occurring in 2018, 2019, 2021, and 2022.
Purpose of the Revision
The FBR’s goal is to improve tax revenue from the real estate sector, which has historically seen discrepancies between declared and actual property transaction values. Current estimates suggest that tax collection from real estate could reach between Rs600 billion and Rs700 billion, while actual revenue remains around Rs200 billion.
Implications for Property Transactions
- New Tax Calculations: The updated valuations will affect federal taxes such as Capital Gains Tax (CGT) and withholding tax.
- Impact on Investment: The FBR aims to shift investment away from real estate, although many transactions in housing societies have stalled, with limited evidence of funds being redirected.
Background on Property Valuation in Pakistan
The FBR has struggled to accurately assess true property values due to significant variations between different areas. Previously, lower declared values have led to tax shortfalls. To address this, updated valuation tables have been published online, providing clearer guidelines for property transactions.
Challenges Ahead
Despite the revisions, some officials have expressed concerns about potential errors in the new valuation tables. These discrepancies are expected to be corrected as they are identified. Furthermore, the actual impact of these changes on real estate transactions and tax revenue will take time to assess.
