by ZeeShan Kahloon 
An astonishing news is circulating among the real estate and construction market i.e. announcement of construction relief package by the PM of Pakistan. Many intellectuals and industry specific executives have hailed this initiative.
The relief package for the construction industry announced by the Prime Minister with the twofold aim of providing employment to daily wage earners, and spurring economic activity. The package also includes additional incentives for builders and developers to build low-cost housing for the poor under the Naya Pakistan Housing Program.
Benefits of Construction Relief Package in Real Estate Sector
Here is a detailed insight on construction relief package and its benefits for real estate sector by the experts at Globe Estate & Builders.
Tax Incentives
The source of the investment will not be checked under section 111 of the Income Tax Ordinance, 2001 until 31 December 2020.
Constructors’ exemption of tax on all construction-related products, except cement and iron, has been suspended.
Tax on builders and developers will be levied on developers at fixed rates of PKR 50 per square foot, and PKR 100 per square yard. All who pursue projects for the poor under the Naya Pakistan Housing Scheme Authority (NAPHDA) would have to pay just 10 per cent of the fixed levy.
All provinces shall exclude sales tax on construction services provided that the builders and developers are paying sales tax at the above fixed rates at the time of sale of property.
All provinces will be fully excluded from provincial sales taxes from low cost housing projects by the regional housing authorities of NAPHDA. All provincial / municipal taxes / fees / levies / charges on the transfer / registration of urban property shall be clubbed under one head and paid at a rate of 2% of the valuation.
All provinces will introduce the e-stamping program in line with the program already implemented by Punjab, and it will be expedited.
No Income Source Disclosure
Investors have been obliged to report source of income over the past 2 years. Under this relief package creditors are no longer required to reveal the source of investment profits. People refrained from investing last year because they were afraid of being challenged in FBR inquiries. Therefore, this move certainly would help the real estate industry.
Measures For Creating Ease Of Doing Business
This can speed up the process of fresh master planning / updating existing master plans and zoning already initiated by provinces. Reduction of project approval period (preferably up to 45 days) by all provincial governments / development authorities via issuance of No-Objection Certificates (NOCs), automation and simultaneous approval processing, strictly in compliance with the timelines set. Wherever possible the NOC system should be replaced by compliance with the bylaws system (after the implementation of fresh bylaws on zoning).
All provinces / development authorities are in the process of implementing completely integrated one window system for obtaining permits and all other customer services / facilitation, which will be expedited. The Prime Minister has already endorsed a policy on high rise building. For Islamabad Capital Territory (CT), notification to this effect has been issued but the same has not yet been provided for other major cities / urban areas that must be made on a priority basis.
One-Time Exemption On Capital Gain Tax
The relief program waives Capital Gain Tax (Tax) being levied on the selling of personal property if:
- The house is less than 500 square yards.
- The flat area (in the other case) is less than 4,000 square feet.
Advance Tax On Property
Advance property sales tax will be lowered to 5% from the previous 10%.
Amendment In Sales Tax Rules
The Federal Government has scrapped the sales tax on building services following the model adopted by the Punjab government.
CVT and applicability of stamp duties In Federal Capital
The same laws that the Punjab and Khyber Pakhtunkhwa Governments have notified for CVT and Stamp Duty collection will now apply in Islamabad.
Construction Sector Given ‘Industry’ Status
With the new ‘industry’ status affixation of the construction sector, the government will provide sector stakeholders with the same facilities that it provides to stakeholders from other sectors – broadly, on the importation of machinery required to conduct construction and development work.
It Is The Perfect Time To Invest And Grow Your Real Estate Business!
