Upcoming Budget 2021-22

Upcoming Budget 2021-22 and Consequences for the Real Estate Sector

Upcoming Budget 2021-22 and Consequences for the Real Estate Sector

The upcoming Budget 2021-22 promises exceptional stability for the real estate sector. There are new government reforms set in motion that shall change the image of real estate for the future. We can prepare ourselves for favourable consequences only, as those are what await the real estate sector.

Impact of Capital Market Incentives 

In the upcoming Budget 2021-22, the government is likely to provide capital market incentives by implementing viable ideas from the Pakistan Stock Exchange Limited (PSX), such as reducing capital gains tax (CGT) on securities disposal.

The Pakistan Stock Exchange Limited (PSX) has submitted its budget recommendations for 2021-22 to the Ministry of Finance. Before holding direct talks with stakeholders in the coming days, the Finance Ministry has tasked the FBR with calculating the revenue impact of each proposal.

Due to these proposals, Pakistan’s capital market saw strong growth over the years in market capitalization. It peaked at around PKR 8 trillion on January 30, 2020, but then plummeted to around PKR 5.7 trillion on April 1, 2020, due to the global downturn caused by the pandemic. Pakistan’s national economic statistics have become unpredictable and pessimistic. The first half of fiscal 2020 revealed some clear signals of an economic recovery. Yet, given the current circumstances, the journey to long-term sustainable growth is projected to take time; yet, the turnaround efforts are well underway. But we can see how positive an impact these capital market incentives have had, living up to our expectations. Given the implementation of solid capital market structural changes, Pakistan has enormous potential.

Promotion of Baluchistan’s Tourism Sector 

The government of Baluchistan intends to set aside a significant sum in the fiscal year 2021-22 budget for the development and marketing of the province’s tourism sector. The administration of Baluchistan is taking innovative steps to promote and enhance tourism infrastructure in the province’s different tourist attractions.

There are advantageous circumstances to be enjoyed due to the proposed projects as they will appeal to both tourists and investors interested in investing in the province’s coastal areas. The new projects would expand tourist facilities, hotels, rest houses, and restaurants and establish additional tourist information centers to give travelers relevant information.

Impact of Petroleum Prices 

To benefit the citizens, the Prime Minister has chosen to keep petroleum product prices the same as they were on May 1, 2021, and a fortnight before. To preserve the same rates, the government must alter the Petroleum Levy and Sales Tax on SKO and LDO.

Maintaining the current pricing will cost the government PKR 2.77 billion in revenue. From May 18 onwards, the following prices will be implemented:

  • Petrol PKR 108.56 / litre
  • HSD. PKR 110.76/litre
  • SKO. PKR 80.00/litre
  • LDO. PKR 77.65/litre

Lower petroleum prices have a lasting positive impact on the economy, so this decision paves the way for fortunate consequences. Even though the government loses a substantial amount of revenue, the conventional wisdom holds that when individuals spend less at the petrol pump, they will automatically send it elsewhere, as if by some flawless law of mathematics and economics. Millions of individual decisions, many of which are influenced by psychology, affect aggregate economic activity.

Thus, the immediate expectation of productivity and future success comes from this decision of the Prime Minister.

Government Aid for the Construction Sector   

In the Budget for 2021-22, the Pakistani government provided aid for the real estate and construction businesses. In this Budget, the government has slashed taxes and allocated funding to help the building and related industries. According to a government official, it is an attempt to reinvigorate the country’s economic growth, and it would provide job prospects. Moreover, the cement FED has been lowered from PKR 2 to PKR 1.75 per kilogram.

Likeable consequences are awaiting the construction sector due to these incentives. The building industries have greater ease to contribute to the nation. All sectors related to the construction sector shall prosper directly, and the sizeable economic growth shall only know success.

Read More: Government of Balochistan Promotes Tourism- budget 2021-22

Subsidy for Naya Pakistan Housing Scheme 

Prime Minister Imran Khan has laid the Naya Pakistan Housing Scheme’s foundation to provide lower-cost housing to low-income Pakistanis. The country has been struggling with economic downfall, trade imbalance, low agricultural productivity, and many more. The government believes that the housing sector, which includes finance, construction, and related building materials, is the only one that can handle all of these issues simultaneously. The Prime Minister believes that its housing plan will improve the country’s economy and banking sector.

The government shall provide PKR 30 billion subsidies to the Naya Pakistan Housing Authority. This subsidy is one of the relief packages of the upcoming Budget 2021-22, and its consequences shall be fruitful for the nation. The working class shall have decent homes to reside in, the unemployment rate shall decrease, and the economy will receive new wings of sturdiness.

The request of the American Business Council (ABC) in Budget 2021-22

The American Business Council (ABC) of Pakistan has requested that the Federal Board of Revenue (FBR) take appropriate measures in the upcoming Budget (2021-22) to encourage Pakistan-born Americans to invest in projects, real estate, and open bank accounts.

The ABC’s budget recommendations for 2021-22, which were submitted to the FBR, revealed a shift in Pakistan resident status from three to six months (preferably nine months). This change will undoubtedly encourage the diaspora to see Pakistan as a viable investment option.

It is also requested to eliminate the need for a no-objection certificate for Americans of Pakistani descent to invest, establish, and manage businesses in Pakistan.

Any person of Pakistani descent should be entitled to choose his field of business in the same way as a local Pakistani citizen can.

Possibility of the Revival of Amnesty Scheme 

In 2018, Pakistan launched a tax amnesty program that generated up to $ 1 billion (PKR 121 billion) in tax income from individuals, associations of persons, and corporations who declared their assets under the program.

Currently, the government is not inquiring about the source of funds used for construction (by builders and developers). In 2021, the government shall maintain the fixed tax on builders’ sales and up to a 90% decrease in taxes on low-income people’s house purchases. But there is a chance that the government will reintroduce the amnesty scheme since the aftermath of the global pandemic is reaching its ends slowly. It is a predicted step that the government might take to induce more money in the development sector.

Conclusion 

Since the pandemic ratios are falling in Pakistan, the tourism sector, construction sector and real estate sector are likely to receive new grants and speedy development. Resultantly, there will be a substantial influx of money that shall spread in all the sectors. The upcoming six months will be critical and precious for the real estate sector as the absence of the pandemic will determine many successes.

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