Karachi, April 26, 2019: For the first time the government is offering domestic real estate amnesty on very lucrative rates.
Since yesterday, the draft of the amnesty scheme is viral over social media, if we believe it to be true, then Pakistan is all set to see the asset class boom in the months to follow, said Muzzammil Aslam an economist.
As per the document, the government is offering amnesty on domestic real estate for a mere 1 percent. The severity of this can be explained in the following illustration.
He said currently, the DC rate for Defence Phase 8, 500yd plot is 1.0 million, FBR rate is 20 million & Fair market value is 60 million. The difference between the FBR rate & market value is 40 million. By paying 1 percent or 400,000/- on 40 million you can regularise your full 60 million.
Prior to amnesty, if anybody opted to sell his/her property usually bound to reinvest the difference amount in real estate due to black money. Hence the liquidity confined only to the real estate market, he added.
Now imagine if we agree to whiten the difference amount and sell in the market then the seller gets the licence to invest anywhere in the economy or deposit the proceeds with the bank.
He said that there will be huge liquidity injection into the system and hence this money can travel into the stock market as well. The market currently is short of confidence led by Benami money and AML issues. We. Believe, this amnesty will overcome this issue in a big way.
He believed that With this amnesty scheme the real estate activity will be resumed and the institutional money starts to flow into real estate due to the resolution of black/white ratio elimination. Banks willingness to provide mortgage financing will also be prompted.
In the end, the government will be the ultimate beneficiary of this amnesty on account of more documentation and mobilisation of savings into the productive sector. This will ultimately resolve the productivity gap issue. Hence lower deficits.
