Real estate challenge

Published March 14, 2023

FORMER FBR chairman Shabbar Zaidi’s assertion that real estate is ‘the parking lot’ of untaxed or dirty money is not a new disclosure. Nonetheless, his claim that he was summoned by the evidently displeased (former) army chief when he attempted to take measures to tax real estate transactions and stop the business of ‘plot files’ to discourage people from hiding their illegal money, shows the extent to which the security establishment is invested in this sector — through housing development projects under the DHA brand in major cities of the country. It is common knowledge that Pakistan’s business elite, bureaucracy, politicians, judges and other affluent sections have been the biggest beneficiaries of the unregulated and undertaxed real estate sector. No wonder, every government has encouraged the investment of dirty money in real estate through multiple tax amnesties, in addition to heavily subsidising investors by not regulating and taxing them — at the expense of the economy’s organised sectors.

Besides causing massive tax revenue losses to the national exchequer, the unregulated real estate business is responsible for several other serious issues facing the country as well. For starters, it is a major cause of unplanned urbanisation that has eaten into swathes of prime fertile agricultural land. Land prices are artificially inflated by developers through the sale of unregistered plot files that have acquired the status of a private parallel currency, making housing inaccessible to low- and middle-income segments of the population. It is also one of the main reasons for the increasing inequality in society. Additionally, the real estate sector forms the bulk of the country’s informal economy, the size of which is estimated to be somewhere between 30pc and 50pc of the documented portion of the economy. It would not be wrong to assume that no effort to reform the nation’s flawed tax system and document the economy can succeed without first making it impossible to park one’s dirty money in real estate assets.

Published in Dawn, March 14th, 2023

Opinion

Editorial

United stance
Updated 13 Nov, 2024

United stance

It would've been better if the OIC-Arab League summit had announced practical measures to punish Israel.
Unscheduled visit
13 Nov, 2024

Unscheduled visit

Unusual IMF visit shows the lender will closely watch implementation of programme goals to prevent it from derailing.
Bara’s businesswomen
13 Nov, 2024

Bara’s businesswomen

Bara’s brave women have proven that with the right support, societal barriers can be overcome.
System failure
Updated 12 Nov, 2024

System failure

Relevant institutions often treat right to internet connectivity with the same disdain as they do civil and political rights.
Narrowing the gap
12 Nov, 2024

Narrowing the gap

PERHAPS a pat on the back is in order for the ECP. Together with Nadra, it has made visible efforts to reduce...
Back on their feet
12 Nov, 2024

Back on their feet

A STIRRING comeback in the series has ended Pakistan’s 22-year wait for victory against world champions Australia....