FBR raises property valuation by up to 80pc in 56 cities
• Latest revision covers 12 new cities in addition to 44 previously included
• FBR chief says valuation rates moderately revised upward
• New rates expected to boost revenue, shift cash from real estate
ISLAMABAD: In a move to bring property valuations closer to market rates, the Federal Board of Revenue (FBR) has raised property valuation rates to up to 80 per cent across 56 cities, aiming to boost revenue collection and redirect investment into more productive sectors of the economy. The new rates will take effect from Nov 1.
This latest revision covers 12 new cities, including Bannu, Chiniot, Kotli Sattian and Ghora Gali. The government has already implemented several tax measures for the real estate sector in the latest budget.
“The valuation rates were moderately revised upward,” FBR Chairman Rashid Mahmood Langrial said, adding that the valuation prices have been changed based on the type of property, its location and other variables.
The tax authority has previously adjusted property valuations four times — in 2018, 2019, 2021 and 2022.
The FBR began publishing updated valuation tables on its website late on Tuesday, and the tables for around a couple dozen cities were available until the filing of this report.
These revised valuations will be used to calculate federal taxes such as capital gains tax (CGT) and withholding tax. Unlike in many other countries, where taxes are based on the transaction value, in Pakistan, the declared collector value is often significantly lower than the actual transaction price.
The FBR collects withholding taxes under Sections 236C, 236K and 7E of the Income Tax Ordinance, as well as the 5pc federal excise duty imposed on property transactions in the last budget. Provinces have also raised district collector (DC) rates for property transactions.
In the previous fiscal year, the FBR collected nearly Rs150 billion in advance income tax under Sections 236C and 236K for property transactions, though figures for revenue collected under Section 7E and other measures are not yet available.
Since 2016, the FBR has been working to determine fair market property prices in major urban centres. In the provinces, valuation tables are typically issued by district collectors under Section 27-A of the Stamp Act of 1899.
A senior tax official involved in the valuation revision process told Dawn that the increases were less dramatic than initially expected.
“We have increased rates marginally, well below market expectations,” the official said, adding that mid-range plot values were used as benchmarks for updating prices. The official acknowledged potential errors in the valuation tables, which he said would be corrected once identified.
Determining true transaction values has been a challenge for the FBR, as property prices can vary significantly between different societies and cities. The official also mentioned that, despite the government’s intention to shift cash away from real estate into productive sectors, transactions in many housing societies have stalled, with no clear evidence of funds being redirected.
A World Bank study estimates that real estate transactions in a comparable economy to Pakistan could generate between Rs600bn and Rs700bn in tax revenue. However, the tax official estimated Pakistan’s actual collection to be roughly Rs200bn.
Published in Dawn, October 30th, 2024