KARACHI: The price of a 500 sq yd plot in Phase 8 of DHA, Karachi, is Rs70 million (equivalent to Rs140,000 per sq yd). However, the value fixed by the government is only Rs1,980 per sq yd. The government therefore receives only Rs49,500 as tax and stamp duty instead of Rs3,500,000 (which would have been the tax if levied on the actual price). So, whenever a 500 sq yd plot in Phase 8 of DHA changes hands, the government loses Rs3,450,500. In Phase 8 alone, 20 plots of 500 sq yd alone are transferred every day, so the government loses Rs20 billion every year in this sector alone. Since thousands of transactions take place in Karachi and the rest of the country every day, the annual loss to the exchequer is mind-boggling, and this is due entirely to the flow of black money into the property market.
The amount of black money involved in Phase 8 alone is therefore Rs414 billion every year. Imagine the quantum of black money flowing into the real estate sector every year and the revenue lost by the government.
The only way to stop black money from flowing into the real estate sector is for property registrars to ascertain the true values of properties changing hands (this can be done by visiting several web sites like zameen.com on the internet).
Before registering the transfer of a plot or house, the registrar should advertise in newspapers asking buyers to bid for the property being transferred. Only after this is done should the registrar allow the sale of the property to the highest bidder, and recover stamp duties and taxes on that value. This procedure is followed by the Customs Department which allows importers to bid for those consignments which are suspected to be under-invoiced (Section 25 of Customs Act). The SECP after strenuous efforts has succeeded in driving out black money from the stock market. If such measures are implemented by the government in the property sector, the state as well as the honest tax-paying buyers will benefit, while tax thieves will be driven out of the market.
Shakir Lakhani
Published in The Express Tribune, April 2nd, 2017.