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BUDGET 2020 & REAL ESTATE IN PAKISTAN

budget 2020 and real estate

BUDGET 2020 AND REAL ESTATE INDUSTRY

  • Pakistan’s Fiscal Budget 2020 has been announced recently. In view of the ongoing global recession and effects of COVID 19 Pandemic, the economies all around the globe have nosedived. In these uncertain and critical times, the budget for next financial year has been not been very encouraging.. Overall the budget may not seem promising for the overall revival of the economy. Nevertheless few very good steps have been proposed for reinvigorating the recession hit Real Estate industry.
  • The Real Estate industry has already been partially benefited due to the PM Imran Khan Incentive Package for construction industry announced few months back during early stages of the corona pandemic. It is a good omen that in current budget, the Government has persisted with its positive policy towards lifting the Construction and Real estate industry.
  • Benefits for Real Estate Industry.
    • Government has relaxed the slabs, rates and other aspects related to Capital Gain Tax emanating from sale of real estate property.
    • Indirect proposals related to higher taxes on banks’ profits and reduced interest rates would also divert investments to other sectors including Real estate.
  • A brief overview of Budget proposals having direct or indirect bearing on the Real Estate are as under:-
    • Reduction in Capital Gain Tax (CGT) Period. Period for levying of CGT on sale of property has been reduced from 8 to 4 years.
    • Reduction in CGT Tax Slabs. The slabs for calculating the CGT have also been reduced after every year, details are as under:-

comparison

SerialTime PeriodBudget 2019-20Budget 2020-21
a.0-1 years100%100%
b.1-275%75%
c.2-375%50%
d.3-475%25%
e.4-8 yrs75%Nil
  • Reduction in CGT tax rate. The CGT rate has also been reduced to 50%, a comparative analysis from previous budget is as under:-
SerialGain in MnsBudget 2019-20Budget 2020-21
a.Up to 5 Mn5%2.5%
b.5-10 Mn10%5%
c.10-15 Mn15%7.5%
d.Above 15 Mn20%10%

Indirect Measures – Budget 2020

  • The interest rates on savings and bank deposits has been reduced. Hence the investors, financial institutions and general public would be encouraged to invest in real estate business and stock exchange instead of keeping money in the banks.
  • Tax on Bank’s profits and Earnings has been enhanced to 15 % hence investors will be discouraged to keep their money in banks. Instead they will be investing in markets and businesses.

The overall impact of the above mentioned measures combined with the Incentive Package for Construction Industry is likely to accrue dividends for the Real Estate Industry as a whole.