Punjab property law changes aim to revive real estate sector

LAHORE: The Punjab government expects recent changes to property laws, including a cut in stamp duty on rural immovable property from 3pc to 1pc, to help revive the real estate market, raise government revenue and provide legal protection to agreements between private parties.

According to an official source, the new framework allows temporary transfer of property rights with legal backing. The source said, “It is a limited duration transfer of rights of property to someone else. You may think of it as a legal cover for agreements among private parties on just Rs1,200 stamp paper that was earlier insecure for both parties.”

The same official said that under the revised arrangement, parties can obtain legal title protection for one year by paying 1pc duty, while a two-year period would require 2pc duty. “Now, by paying 1 per cent duty they can hold the property title legally for one year and for two years with 2pc duty. On one hand, it will secure people’s rights and on the other hand will boost government revenue,” the official said while requesting anonymity.

Uniform duty for urban and rural property

A notification issued on April 10 said the amendments introduce and define an “assignable deed” and set a uniform stamp duty of 1pc on such conveyances. The notification said stamp duty in urban areas was already charged at 1pc of the value of immovable property, while in rural areas it stood at 3pc, creating unequal treatment.

The notification added that the measures are meant to simplify and rationalise the law, reduce uncertainty and litigation, lower transaction costs and encourage formal documentation of property transfers. It also said the changes are intended to stimulate transactions and investment in the real estate sector, protect bona-fide purchasers and investors who have paid full consideration, improve administrative efficiency, broaden the tax base and support long-term revenue stability while guarding against fraudulent transactions through safeguards and transitional provisions.

Officials and market participants see relief

A real estate agent said the reduction in stamp duty on rural immovable property would particularly benefit housing society developers, investors and buyers. He said Lahore has many housing schemes, most of them located in rural areas, with some already developed and others still in development, execution or planning stages.

The agent said those who bought large tracts of land in recent months but had not yet transferred them in their names would now get major relief because they would pay only 1pc stamp duty instead of 3pc before the amended ordinance was signed. He added that investors, general buyers and genuine purchasers who had bought plots but not completed transfer would also benefit.

Punjab Board of Revenue Secretary (Tax) Anjum Riaz Sethi said the purpose of the amendments was to revive what he described as a dying real estate sector, generate economic activity and curb corruption in the revenue department. “We have removed the difference between urban and rural immovable property by fixing 1pc stamp duty on both. It will benefit all including developers, investors, genuine buyers etc,” he said.

Mr Sethi said registry costs had risen sharply, which had slowed investment in the property market. He said, “The important thing is that the property transaction document or agreement can now get a full legal cover without paying FBR taxes for a period of one year by paying just one percent stamp duty. This arrangement didn’t exist before. Moreover, if the time duration exceeds one year, it will be 2pc. At this moment, all FBR related taxes will have to be paid.”

He also said the government plans to revise valuation rates and DC rates, saying the current rates do not reflect the actual situation. “All such activities aim to attract people, especially the overseas Pakistanis who have already invested in the UAE and other countries, to invest in their own country,” Mr Sethi said.