The Law and Justice Division is working on the establishment of Appellate Tribunal of Immovable Property for filing of appeals against the order of acquisition of any immovable property by the Directorate General Immoveable Properties (DGIMP). The PML (N) administration in its Finance Act passed in May 2018 took a major initiative to correct the valuation of real estate for the purpose of taxation for which DGIMP was envisaged to be established.
The Federal Board of Revenue (FBR) has completed the administrative setup of Directorate General IMP, but two legal steps are required for completion of the process: (i) constitution of a tribunal is required to allow the decisions of the DGIMP on acquisition of immovable properties to be challenged; and (ii) rules to be notified for the functioning of the DGIMP.
Once the tribunal is established and rules are notified, the FBR will move a summary to the Prime Minister to notify the DGIMP in the official gazette. Recently, the FBR has revised upward the values of residential and commercial properties in Karachi, Lahore, Islamabad Hyderabad, Sukkur, Rawalpindi, Peshawar, Quetta, Abbottabad, Mardan, Gujranwala, Sialkot, Faisalabad, Sargodha, Jhang, Gujrat, Sahiwal, Multan, Jhelum and Bahawalpur. However, the buying and selling of immovable properties is still taking place below their actual market value.
The Law and Justice Division has informed the FBR that the Constitution allows the Directorate General IMP to impose restrictions on buying/selling of immovable properties or undertake proceedings for acquisition of properties.
Directorate General IMP has the authority to initiate proceedings where the Directorate-General, on the basis of valuation made by it, has reason to believe that any immovable property of a fair market value has been transferred by a person (transferor) to another person (transferee) less than the fair market value of the immovable property to avoid payment of taxes, concealment of unexplained investment or avoidance or reduction of capital gains tax.
DG IMP has given the task to the Pakistan Revenue Automation Limited (PRAL) to make dedicated software to integrate real estate websites with the challans submitted under section 236K of the Income Tax Ordinance 2001. The integration would be instrumental in identifying cases of under-statements of values of immovable properties. The values of immovable properties on the real estate websites and actual challans would be compared through the dedicated software of PRAL.
The FBR will also introduce 'Valuation Dash Board' to integrate real estate with computerized payment receipts (CPRs) deposited under section 236K of the Ordinance to ascertain fair market values of properties vis-à-vis Challans. Directorate General IMP-IR shall act as FBR's specialized agency on all matters relating to real estate/immoveable properties, ie, open plots, constructed properties both residential, commercial & industrial, agricultural lands, housing schemes/projects/societies/towers/chains of luxury apartments and other related/similar assets.
The agency would also cover real estate classification in respective jurisdictions, office building (urban and suburban, skyscrapers, high rise buildings, single tenanted/multi-tenanted); retail (properties that house the retailers and restaurants and food outlets-multi-tenanted/standalone buildings) and industrial buildings house industrial operations, ie, heavy manufacturing, light assembly, bulk warehouse, flex industrial (both industry and offices) and research & development, mostly located outside of urban areas, especially along major transportation routes.
The FBR said that the multifamily covers apartments, condos, co-ops, and town homes, high rise, mid rise, garden style and special purpose housing (particular population segment, including student housing, seniors housing, and subsidised - either low income or special need - housing).
The sector of hotels covers establishments providing accommodations, meals, and other services for travelers and tourists. It includes independent (boutique) or flagged-(part of a major hotel chain); extended-stay and resort: full-service, large amount of land, in a typical resort location and has an attached golf course, water park, or amusement facility and special purpose real estate may be owned by commercial real estate investor.