Sunday, July 14, 2024
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Low Budget Homes – No Incentive Offered in Federal Budget

Low Budget Homes are need of the hour due to rapidly increasing population and soaring cost of living. However, this important need is not on the priority list of federal government. Only few days ago, Finance Minister Mr. Ishaq Dar from the ruling PML-N presented budget for the fiscal year 2015-16. Since then, financial pundits are busy determining the impact of federal budget on different economic sectors including real estate. Business community and most of the Pakistanis appreciated government for announcing such positive budget. However, After a careful preliminary analysis, it can be stated that government failed to offer incentive for low budget homes. The only initiative undertaken in this regard is a mega project Ashiana Housing Scheme in Punjab.

Talking specifically about the real estate, apparently no new taxes were imposed on the sector. However, at the same time, no relief is given to property buyers, sellers and investors. Inflation ensnaring Pakistan makes it really difficult for lower class to construct homes.

The darker side of the picture depicts that Ashiana Housing Scheme is just announced in Punjab only. This is not enough to meet the shelter needs of every Pakistani belonging to lower-middle class. Few months ago, Federal Minister for Housing & Works, Muhammad Akram Khan Durrani, declared the government has decided to construct homes and finalized the sites for the construction of low budget housing units in the District of Lahore, Charsadda, DI Khan, Jehlum, Karachi, Bannu, Hyderabad, Quetta, Lakki Marwat, and Gwadar. No further progress in this regard has been witnessed.

Ammouncement of incentive for real estate was awaited but the issue seems not too interesting to ponder on. Federal Budget failed to offer incentives for low budget homes and even government did not declare any such plan. According to experts, government could have used funds available for affordable housing.

Experts at stated that previous governments did not take serious steps to mitigate housing issue but PML-N took the initiative and announced to construct 0.5 million homes throughout Pakistan and people were expecting something concrete in this regard. To our dismay, no such disclosure was made regarding this plan in federal budget.

At the same time, it is worth mentioning that to encourage investment in real estate sector, incentives are announced for REIT development schemes. Details of the incentives given to REIT developers are as under

  1. Capital Gains of any person who sells a property to a REIT development scheme is proposed to be exempt from Income Tax up to 30.6.2018.
  2. It is also proposed that if a development REIT Scheme for the development of housing sector is set up by 30.6.2018, for the first three years the rate of Income tax chargeable on dividend income of such REIT may be reduced by 50%.

Echoing similar views, several real estate agents expressed mixed emotions regarding federal budget. However, all of them agree that Pakistan need to introduce serious reforms to make this sector more attractive for genuine buyers.

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