IT is impossible now for a middle class
tax-payer to buy a house. A 500-square yard plot in Karachi’s Phase VIII of
DHA, costs Rs70 million (equivalent to Rs140,000 per sq yd). On the other hand,
the value fixed by the government is Rs1,980 per sq yd. The government receives
only Rs49,500 as tax and stamp duty instead of Rs3.5 million if the tax is
levied on the plot’s actual price. Thus, whenever a Phase-8 500-sq yd plot
changes hands, the government loses Rs3.45 million.
Twenty such plots are transferred in this
phase every day. Thus the government loses Rs20 billion every year. Since
thousands of transactions take place daily in Karachi and the rest of the
country, the annual loss to the exchequer is mind-boggling. This is due
entirely to the flow of black money into the property market.
According to conservative estimates, the
amount of black money involved in Phase 8 alone is around Rs 414 billion every
year. Imagine the quantum of black money flowing into the entire real estate
sector and the government’s revenue loss.
The only way to stop the flow of black money
into the real estate sector is for property registrars to ascertain the true value
of properties changing hands. This can be done by visiting several websites on
the internet. Before registering the transfer of a plot or a 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 practice is followed by the Customs
Department which allows importers to bid for those consignments which are
suspected to be under-invoiced (Section 25 of the 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 will benefit.
Shakir Lakhani
Karachi
Published
in Dawn, May 3rd, 2017
https://www.dawn.com/news/1330716/black-money-in-real-estate
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