WHT on banking transactions
Lahore: Dubai property market has become a major investment destination for oversees Pakistanis, particularly after the imposition of withholding tax on banking transactions and new property evaluation system introduced in the last federal budget 2016-17.
Real estate market agents have said they thought the UAE property market was costlier than that of Pakistan, but its high rental profit yield is attracting Pakistan’s undocumented real estate sector which has been perturbed by the complicated and double taxation based system in Pakistan.
On the other hand, the UAE dirham, which is pegged to the greenback, is another incentive for the investors, as any rise in the dollar’s value will automatically increase the worth of dirham.
So, the investment in dirhams will be more profitable than one in rupees, attracting oversees Pakistanis towards Dubai real estate sector.
Al-Haram State Advisor CEO Adnan Sheikh said that Pakistan real estate market banked on money sent by overseas Pakistanis, particularly those residing in UAE; however, this trend has been reversing for the last two years after imposition of the WHT on banking transactions.
“Majority of the businessmen, perturbed by the imposition of 0.06pc withholding tax on banking transactions, pulled their money out from the banks and invested it in the real estate of both Dubai and Pakistan,” he said, and added, “The upcoming Expo Dubai 2020 may drive up the apartments’ rents, attracting the businessmen to invest more.
Arshad Khan of the Ghazi Estate Brokers said that a big chunk of money that was invested in the Dubai property market came from the overseas Pakistanis.
He termed it a welcome step, as major portion of that money returned to Pakistan in the form of remittances.
“In any case, investment in Dubai comes to Pakistan in the form of remittances earned through sales or rental income of properties owned by Pakistanis,” he elaborated.
Quoting a data of MENA research of the UAE, he said that Pakistanis were not amongst UAE’s top spenders as Indians topped the list of foreign investors in Dubai property.
In 2015, they spent more than 20 billion dirhams out of total 135 billion dirhams.
British and Pakistani buyers followed with 10.8 billion dirhams and 8.4 billion dirhams, respectively. Iranians spent 4.6 billion dirhams, Canadians 3.7 billion dirhams while the Russians 2.7 billion dirhams, added the report.
Remittances received from the UAE between July and December increased 9.4 percent to $2.1 billion on a year-on-year basis, while inflows from the UAE had registered the largest increase (26.1 percent) when Pakistan received $4.1 billion from expats in the UAE, State Bank of Pakistan (SBP) data shows.
The major portion of remittances from the UAE is contributed by expats residing in Dubai.
In the first seven months of the last fiscal year, 2015-16, remittances from Dubai recorded a 39.
7 percent year-on-year surge as Pakistani expats in Dubai remitted $1.67 billion to their country.
A Dubai-based Pakistani said he invested around Rs4.5 million in Lahore two years ago and now the value of his property had almost doubled due to ongoing infrastructure and development projects in the city.
He intends to take a loan and invest more in the property sector, which indicates his faith in the sector’s strong recovery and better returns of his investment.
With a marked improvement in the law and order situation in general and the economy in particular, overseas Pakistanis are investing in major housing schemes in key cities.
Pakistan’s real estate sector seems to be more attractive for expats as they invest primarily in houses, residential and commercial plots.
Karachi, Lahore and Islamabad are the prime focus of overseas Pakistanis, who prefer to invest in Karachi due to stability in the security situation there.
Sector’s insiders say a lot of Pakistanis invest in properties abroad, especially in Dubai, while on the other side, a major portion of income generated in foreign lands finds its way back to various economic sectors, including property.
According to a research report, more than 90 percent of Pakistani expatriates in the UAE spend their income to purchase properties back home in Pakistan.
The country’s property market price trend continued to go up, attracting major portion of record $18.79 billion remittances in 2014-15.
A new report by KPMG asks investors in Dubai to expect the start of a new growth curve for property prices in 2017.
According to experts, the hundi and hawala business in Pakistan has crossed $15 billion a year mark.
National Bank of Pakistan Global Home Remittance head Irtiza Kazmi said that inflow of remittances could be doubled by elimination of hundi system, besides adopting different strategies.
Kazmi said there was a huge potential for growth in the remittances that could be raised to over $40 billion per annum in coming years.
In 2015-16, for the first time the remittances surged to $20 billion, showing a $2 billion surge over $18 billion remittances received in 2014-15.
“However, there is still a huge amount of money being transacted through unorganised and illegal channels,” he said.