KARACHI: What began as a massive effort to take on the property mafia has ended with a whimper. The ordinance issued on Monday gives the FBR power to determine fair market values of property prices across the country and update its information every year. But the fair market values that the FBR will be relying on are provided by real estate stakeholders and builders, not by an independent panel of valuators selected by the State Bank, as originally stated in the Finance Act.
Aqeel Karim Dhedhi, also known as AKD and widely considered to be an important player in the country’s real estate and property development sector, claims that with the new property tables the declared value of a 500 sq yards plot in DHA Phase 8, Karachi, will become Rs10 million. It used to be Rs1.5m under the old system.
The new system will undoubtedly generate more revenue for the government, through stamp duties and the Capital Gains Tax (CGT), but the stated intention behind the measure — to tackle the property market as a favoured destination for black money — has been defeated with the compromise. With the new valuation tables announced by the FBR and the elimination of the role of independent valuators, the government has won little more than a sliver in additional revenue.
Property developers argue there are good reasons to not resort to independent valuators though. “We told the government that whenever outside valuators have been used, it has opened the door to corruption,” AKD says, mentioning some high-profile corruption investigations over the past few years in which misdeclaration of property values played a key role. In all of them, he adds, it was the judgement of outside valuators that was instrumental in creating a scam.
Members of the Association of Builders and Developers (ABAD), who were involved in negotiating the new property valuation tables with the government, tell Media that with the new figures the declared prices of property “have now been brought to 20 to 25 per cent of their market value”. A brief survey of prices of residential properties conducted by Media confirmed this ratio.
It is still not clear how exactly the government has drawn up its valuation tables. “They called for property values from various brokers around the country,” says AKD, “then checked the values themselves.” When pressed for the procedure applied to verify the figures, he would simply say “the government got itself entangled in a mess when it picked this battle, and just wanted to extricate itself”.
