Govt assures IMF of strict penalties on real estate agents and owners for tax evasion

The government of Pakistan is set to take strict action against tax evasion and illegal activities in the real estate sector by establishing the Real Estate Regulatory Authority (RERA). Under this initiative, real estate agents and property owners who engage in tax evasion could face fines of up to Rs. 1 million (10 lac) and even imprisonment for up to three years. 

The government has laid out a comprehensive fine structure to ensure compliance. Individuals conducting real estate business without proper registration could be fined between Rs. 50,000 and Rs. 500,000. Meanwhile, agents who provide false information may be subjected to penalties ranging from Rs. 200,000 to Rs. 500,000. Wrongful property transfers will carry heavier consequences, with fines ranging from Rs. 500,000 to Rs. 1 million. Additionally, if a person fails to submit legal documents may encounter fines between Rs. 50,000 and Rs. 200,000. 

Read more: Understanding 45% tax on property sales for non-filers in Budget 2024-25

This move comes in reaction to the International Monetary Fund’s (IMF)’s demand for improved tax collection and enhanced regulatory oversight in the real estate sector. The IMF has been urging the government to impose stricter measures to curb tax evasion as part of its negotiations with reference to Pakistan’s $7 billion loan program. The real estate sector has long been considered a hotspot for undocumented transactions, which often bring about the huge revenue losses for the government. 

Presently, Gov-level talks between Pakistan and the IMF are under process, and it is focusing making tax reforms, and fiscal discipline maintaining to avoid fiscal deficit. These discussions will continue for the next two weeks, after which the IMF review mission will likely submit its findings to the Executive Board. The final decision regarding the disbursement of the next $1.1 billion tranche is expected by the end of this month or early April. 

This initiative of the Government for introducing RERA is reflecting dedication of the Government to bringing transparency to the real estate sector and highlighting financial irregularities. If properly executed, these measures could assist in  

• Improving tax compliance 

• Produce additional revenue 

• Build investor confidence by ensuring that real estate transactions are operated in a fair and legal manner