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Effect of budget 2021-2022 on Pakistan Real Estate

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The upcoming Budget for Fiscal Years 2021-22 and Its Implications for the Real Estate Industry

Budget 2021-22, presented shortly, promises exceptional stability for the real estate sector. However, new government reforms have been put in place, and they will have a significant impact on the way real estate is perceived in the future. Therefore, they can anticipate only positive outcomes in the real estate sector, and we can only prepare ourselves for them in advance.

The Effect of Capital Market Incentives on the Economy

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

According to the Ministry of Finance, the Pakistan Stock Exchange Limited (PSX) has submitted its budget recommendations for 2021-22. However, for the FBR to calculate the revenue impact of each proposal before holding direct discussions with stakeholders in the coming days, the Finance Ministry has delegated authority to do so.

As a result of these proposals, the market capitalization of Pakistan’s capital market has seen significant growth over the years. It reached a peak of approximately PKR 8 trillion on January 30, 2020, before plummeting to approximately PKR 5.7 trillion on April 1, 2020, as a result of the global economic downturn brought on by the pandemic. As a result, the national economic statistics of Pakistan have become unpredictable and pessimistic in recent years.

 The first half of fiscal 2020 revealed some clear signs of an economic recovery. The second half of fiscal 2020 showed some clear signs of an economic recovery. However, given the current circumstances, it is anticipated that the journey to long-term sustainable growth will take some time; however, the turnaround efforts are well underway. However, we can see the positive impact of these capital market incentives, and they have exceeded our expectations. Pakistan has enormous potential, especially if it implements substantial capital market structural changes as soon as possible.

Promotion of the Tourism Industry in Baluchistan

During the fiscal year 2021-22 budgeting process, the Baluchistan government intends to allocate a significant amount of money to develop and market the province’s tourism industry. In addition, Baluchistan’s administration has taken innovative steps to promote and improve tourism infrastructure in the province’s various tourist destinations.

Because the proposed projects will appeal to tourists and investors interested in investing in the province’s coastal areas, there will be favorable circumstances to take advantage of due to their implementation. The new projects would increase the number of tourist facilities, such as hotels, rest houses, restaurants, and the number of tourist information centers available to provide travelers with relevant information.

The Implications of Rising Oil Prices

The Prime Minister has decided to keep petroleum product prices at the same level as they were on May 1, 2021, and a fortnight before that. It is because it will benefit the general public. However, to maintain the same rates, the government must change the Petroleum Levy and the Sales Tax on SKO and LDO products.

The government will lose PKR 2.77 billion in revenue if the current pricing structure is maintained. Therefore, prices will be implemented beginning on May 18th at the following rates:

Petrol costs PKR 108.56 per litre HSD, PKR 110.76 per litre SKO, PKR 80.00 per litre LDO, and PKR 77.65 per litre LDO.

The economy benefits from lower petroleum prices for a long time, so this decision sets the stage for favorable outcomes. Even though the government loses a significant amount of money, conventional wisdom holds that when people spend less money on gasoline at the gas pump, they will automatically send it somewhere else, as if by some flawless law of mathematics and economics. Thus, aggregate economic activity is influenced by millions of individual decisions, controlled by psychological factors.

As a result of the Prime Minister’s decision, the immediate expectation of increased productivity and future success has been raised.

Aid to the Construction Industry from the Government

The Pakistani government included assistance for the real estate and construction industries in its fiscal year 2021-22. The government has reduced taxes and provided funding to assist the construction and related industries in this year’s Budget. According to a government official, the initiative is an attempt to revitalize the country’s economic growth while also providing job opportunities. Furthermore, the cement FED has been reduced from PKR 2 to PKR 1.75 per kilogram of cement produced.

Positive consequences are in store for the construction industry as a result of these incentives. The building industries are better positioned to make a positive contribution to the nation. All sectors directly or indirectly related to the construction industry will prosper, and the substantial economic growth will only be a success.

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Subsidy for the Naya Pakistan Housing Development Project

Prime Minister Imran Khan has laid the groundwork for the Naya Pakistan Housing Scheme, which will provide lower-cost housing to Pakistanis with limited financial resources. The country has been dealing with economic decline, trade imbalances, low agricultural productivity, and others. Because the housing sector encompasses all of these issues simultaneously, the government believes that this sector – which includes finance, construction, and related building materials – is the only one that can handle them all. In addition, the Prime Minister believes that the country’s economy and banking sector will benefit from the government’s housing plan.

Government subsidies for the Naya Pakistan Housing Authority are expected to total approximately PKR 30 billion. This subsidy is one of the relief packages included in the upcoming Budget 2021-22, and the consequences of its implementation will be beneficial to the entire country. Affordably priced housing for the working class will be made available, the unemployment rate and the economy will gain new strength and stability.

The Possibility of the Reintroduction of the Amnesty Program

As part of the program, individuals, associations of persons, and corporations who declared their assets could generate up to $ 1 billion (PKR 121 billion) in tax revenue.

Currently, the government is not inquiring about the source of funds used for the construction of the building (by builders and developers). In 2021, the government will maintain the fixed tax on builders’ sales while reducing taxes on low-income people’s home purchases by up to 90 percent. However, there is a possibility that the government will reintroduce the amnesty scheme, given that the aftermath of the global pandemic is slowly coming to an end. It is anticipated that the government will take this step to attract more investment into the development sector.

Conclusion

Since the pandemic ratios in Pakistan are decreasing, it is likely that the tourism industry, the construction industry, and the real estate sector will receive new grants and will see rapid development. Consequently, there will be a significant influx of money, which will spread throughout all sectors of the economy. As the absence of the pandemic will determine many successes in the real estate sector, the next six months will be critical and priceless for the industry.

Author Bio

Waqas Hussain is a senior Analyst and Search Engine Expert. Extensive experience being a lead writer in Estate Land Marketing | Blue World City. Work for years with local and international enterprises. Also, represent well-known brands in the UK.