ISLAMABAD: Representatives of the real estate and construction sector on Wednesday backtracked on their commitments made to the government before the National Assembly Standing Committee on Finance, opposing the increase in the official land rates on which taxes would be calculated.

Representatives of the real estate sector from various parts of the country, along with senior officials from the Association of Builders and Developers (ABAD), were invited to the standing committee meeting after they filed a public petition against the Federal Board of Revenue (FBR).

When committee chairman Qaiser Sheikh allowed the realtors to highlight their woes, they contended that the sale and purchase of property had almost ground to a halt, while builders` business was on the verge of collapse due to the newly imposed valuation rates.

Incidentally, Federation of Pakistan Chambers of Commerce and Industry President Rauf Alam also made a case for realtors and builders, saying that there were heightened fears of capital flight from the country if the heavy taxes on real estate and builders were not reduced.

He suggested that the settlement between the realtors and the government made earlier this year be deferred for some time to allow builders and the real estate market to get comfortable with the new mechanism.

The government had increased the minimum rates of properties known as the `deputy commissioner (DC) rate` in various cities of the country in August this year.

After the agreement, a law was passed that allowed the FBR to evaluate the market price of properties being sold across the country.

However, there were significant differences between the market rate at which the properties are sold and purchased and the DC rates on which taxes are charged.

However, committee members, including Muttahida Qaumi Movement`s AbdulRasheed Godil, decried the realtors for showing lower property values while filing their taxes.

`The price of a house in the DHA with a basement is shown as Rs9 million and taxes are calculated at this value now tell me where can I find a house lil(e that in DHA Karachi,` Mr Godil said, adding, `There is still a huge gap between the market price and the documented rates of properties.

The committee was also informed that members of ABAD paid around Rs8m in taxes during the previous fiscal year.

Meanwhile, Mr Alam said that since the real estate sector had been lef t undisturbed by the government for a long time, the market had yet to adjust to the new rates.

Former ABAD vice president Arif Jeeva told the NA body that property prices had dropped by 60-70 per cent after the new valuation rates were imposed, adding that people had started asking for refunds on booked properties.

`There has been panic in the marl(et for the past four to five months, which will have a serious impact on the national economy,` he said.

Meanwhile, real estate agents were of the view that taxes on residential properties were used to be Rs300,000, but had now been raised to Rs1.8m.

The committee was told that the main issue was the difference between the valuation table rates at the DC office and the independent valuation conducted by the FBR.

Pakistan Muslim League-Nawaz MNA Sheikh Fayyazuddin took issue with the realtors` viewpoint, saying, `You file taxes at rates that are still at half the value of the market rate, but is the commission you receive also at the same rate? I think not; but you`re still complaining that the value is too high now.

The FBR chairman also expressed a similar opinion, saying that the country could not progress if the system succumbed to the pressure of each sector that was taxed.

`They all agreed to this formula after several meetings, but now, much like the traders, they have all come together to foil its implementation,` FBR head Nisar Mohammad Khan told the committee.

It was finally decided that a four-member sub-committee would be constituted under MNA Saeed Ahmed Khan Manais to make further recommendations with the consent of all stalceholders.