Despite conclusive talks between the government and property dealers, real estate sector is unlikely to survive the brunt of heavy tax regime imposed in the budget 2016-17 as property transactions, according to some estimates, have dipped by up to 90 per cent during last two months.

Defense Housing Authority and Bahria Town have witnessed merely 5 per cent to 10 per cent property transactions during July and August across the country. Property transactions in a majority of other housing societies and private lands have also touched rock bottom, showing no signs of recovery.

It adds to the downward trend as litigation has started with a petition filed in the Supreme Court against excessive property taxes.

Another petition is on the way to challenge new property valuation rates by the FBR, claiming that each province has complete autonomy to regulate tax under Deputy Commissioner (DC) rate and the federal government cannot intervene in provincial tax domain, violating the 18th Amendment.

"Apart from exorbitant taxes, confusion about applicability of federally-imposed taxes and provincially-regulated taxes has put a dampener on the sale and purchase of property," says Arshad Khokhar, Vice President of DHA Real Estate Association Pakistan.

He says nobody is exactly mindful of the implementation and effects of taxes, valuation of withholding tax, capital gains tax, stamp duty, capital value tax, registration fee, and transfer fee, etc.

He recommends "one table mechanism" enlisting all federal and provincial taxes to help figure out how much is to be paid.

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"It is a complex scenario. Before imposing taxes on real estate, the government should sensitise property dealers and common people about the technicalities involved," says Rana Majid, Paramount Property Dealer in Bahria Town Lahore.

An FBR official, seeking anonymity, admits that that taxes’ valuation issue has turned into a bane for the government. From July 15 to August 15, he claims that the government revenue has plummeted to almost 85 per cent.

"We are still engaged with key players of the Chamber of Commerce and Industries across the country to keep the real estate industry stay afloat," he concludes.

Oversees Pakistanis have also dragged their feet in the sale and purchase of property in DHA and Bahria town Lahore, Islamabad, Karachi, Gujranwala, Multan, and Bahawalpur.

"Pakistan diaspora is our major client. It is alarming that out of 670 potential investors only 20 have contacted us in the last 50 days," informs Rehmat Shuja, CEO Din Associates, dealing in both DHA and Bahria Town.

Reluctant oversees Pakistanis have impacted the flow of remittances in the country. According to the State Bank of Pakistan, remittances in July 2016 have declined by 20 per cent in comparison to the amount received in July 2015.

Former finance minister, Salman Shah, says Pakistan depends on remittances for over 36 per cent of its current account receipts and property meltdown may bring it down. He suggests that the government must diffuse the tension and not influence provincial tax system through new valuation rates.

Mian Athar Mehmood, CEO of Athar Associates in Bahria Town Lahore, who was a part of the property dealers’ team that negotiated with the Finance Minister Ishaq Dar, says that with FBR’s new rates, commercial per marla price stands at Rs1 million as against Rs0.7million in the past and residential per marla price is Rs0.42 million against Rs0.29 million in the past.

According to real estate advisors, capital flight is picking momentum after confusion, fear and uncertainty reigning supreme over the property market. Real estate advisors claim more than Rs90 billion have been taken away from the real estate market within three months and much more is to go out from Pakistan to Dubai and the UK real estate markets.

Another issue is the No Objection Certificate (NOC) that has been made mandatory by the excise department for the sale and purchase of vacant plots in all housing societies, including DHA and Bahria Town.

DHA Secretary Information, Muhammad Asif, says that clients are wary as under the new law, they are required to prove their source of income and receipts of all paid taxes to get eligible for the transfer of a plot. "This will open the lid for corruption," he says.