Although one may hope for the good news with the advent of the New Year, unfortunately there will be none for forthcoming from Pakistan's real estate sector and the slump which began in December 2007 will continue in 2011, as there are no signs of recovery for the ailing property market.
The December 2007 downturn was coupled with the Government's decision to increase the Capital Value Tax (CVT) from two to four percent in the 2009-2010 fiscal year. Although the objective was to collect 15 billion rupees from property transactions, in reality the Federal Board Of Revenue (FBR) collected only 2.5 billion rupees, one billion rupees less then it did in fiscal year 2008-2009.
In the current fiscal year (2010-2011) the Government has lowered the CVT from four to two percent, while the Provincial Government have enhance collector rates and revised the valuation tables ( both instruments are necessary in determining the market value of a property) significantly upwards. The end result has been that investors have stayed away from buying property.
The series of financial setbacks in the local market as well as in the Dubai property market, which began in the third quarter of 2008, still weigh heavily on the minds of local and overseas Pakistan Investors; they remain reluctant to invest in Pakistan's property until prices go up, and this has prolonged an uncertain situation, loading to financial losses not only for property sellers and real estate agents, with high collector rates and the prevailing status quo between buyers and sellers, it will require a miracle to push the market back up to the levels prior to December 2007.