Lahore: Pakistan’s Real Estate sector is likely to face another term of tedious activities all across the country as realtors said that they are in a state of panic due to Statutory Regulatory Orders, recently issued by Federal Board of Revenue.
In this backdrop, the reality market of Lahore has issued a warning to both investors and real estate agents that the sector can observe a possible decline in coming months and prices might fluctuate downward from December 2020 and onwards.
FBR has issued two SRO’s recently, i.e. SRO 773(1)/2020 in August and SRO 924(1)/2020 at the end of September. The former SRO said that banks are now required to provide information of customers in compliance of FBR SRO 773(1)/2020, where any payment of RS1 million or above and any deposit of Rs10 million and above during a month will be reported to FBR.
The latter SRO 924(1)/2020 said that all real estate agents will now have to provide information of sale and purchase of transactions and their ultimate beneficial owners to FBR and have to do a strong Customer Due Diligence; the tax collecting agency will do an onsite inspection as well if required. This SRO is also applicable to jewelers and accountants.
Both SRO’s have created a panic amongst people associated with the business, especially the later one, since it endorses anti money laundering and terror financing regulations, an attempt crucial for Pakistan for matters pertaining to the Financial Action Task Force.
“Previously markets were enjoying some relief but these two SRO’s are creating a panic among us”, said Mian Talat, former president of DHA Estate Agents Association.
The market has gained around 30% in last four months mainly due to amnesty scheme and reduction in interest rates. There is a general perception that amnesty scheme enabled inflow of black money in market and many influential people from different walks of life have legalized their money from such amnesty schemes.
“This amnesty scheme will expire on December 31st 2020 and will not get an extension due to FATF and AML, however construction sector will still get a benefit”, Talat said.
There are rumors in the market that though in the last monetary policy interest rate remain unchanged but State Bank of Pakistan will increase interest rates in future which can attract bank deposits or national saving schemes rather than real estate investments.
The other reason of a possible negative trend which market said is due to the second wave of Covid-19, inflation and economic and political conditions of the country which are not indicating a continuous upward trend in prices.
Aftab Ahmad, former CEO of Lahore and Islamabad Stock Exchanges, and founder of digital marketplace platform said that the FBR’s new circular about the intermediaries recording the details of their clients is in line with FATF requirements.
“The same has been in the knowledge of most of the intermediaries like the property dealers and the gold and precious stone dealers. Many had already been adopting this practice for their own record reconciliations”, Ahmad told Express Tribune.
The new circular only makes it a matter of must compliance now. The market has not seen any adverse impact of the same so far. Those expressing reservations are only airing their respective fears, which is not a reflection of how the market has treated the new circular, he added.
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