Govt’s revenue from land, apartment sales declines
The government’s revenue collection from sales of landed property — land and apartments — has been showing a downward trend in recent months.
This has been attributed to a host of factors. These include: a substantial fall in land prices, enhanced official value for such property – both land and apartments – for executing sale or purchase deeds and related higher registration cost, inability of many buyers to show the availability of ‘declared’ amount of money in their tax returns on account of not disclosing their “hidden” or “mattress” money, earned properly or not, matching the value of the registered deeds, withdrawal of the hitherto available concessionary tax rate for ‘investments’ of ‘undeclared’ incomes for purchase of land or flats and ongoing restive political situation.
Even those who are otherwise ‘able’ to buy landed property or flats to take the benefits of market-based lower prices have dropped their plans because of the ongoing political turmoil centering over the ‘character’ or ‘nature’ of polls-time government, officials and experts said.
Around 10 per cent fall in revenue earnings was recorded during the first three months (July-September) of the current fiscal year (FY), 2013-2014, over that of the last three months of the last fiscal.
The Directorate of Registration collected over Tk 4.79 billion in the forms of registration charges, fees for certified copies of registered deeds and also stamp fees during the July-September period against Tk 5.51 billion collected in the April-June period of the last FY.
Talking to the FE, Inspector General of Registration (IGR) Khan Md. Abdul Mannan confirmed the downward trend in land sales in recent months.
He said the recent fall in the prices of land prompted many of the sellers to change their minds. “Land prices recently fell by 15 to 20 per cent. So, many sellers have adopted a wait-and-see policy to get much higher prices in the future,” he said.
Terming financial crisis as another reason behind less revenue collection, Mr. Mannan said many people, especially the expatriate Bangladeshis, do not want to make any investment because of the restive political situation now prevailing in the country.
Seeking anonymity, another senior official of the IGR Office said the government, however, is likely to reach the revenue target of Tk 50.0 billion as registration and related fees and charges in the ongoing FY, 2013-2014, even if the trend continues further.
“Yes, higher registration fee is one of the main reasons that left a number of flats or apartments unregistered in the capital and elsewhere. But we’ve nothing to do in this regard,” he said.
The government annually earns Tk 50 billion from 13 areas relating to registration of transfer deeds, including fees, certified copies of the documents, stamp fees, tax at source, renewal fees, land hand-over fees and other kinds of fees.
Land and apartment buyers normally pay a minimum of 8.0 and a maximum of 12.50 per cent of the land prices, to the government exchequer, depending on the location of the property.
The issue of high registration cost also has come as a major blow for the realtors as a number of their customers started staying at the unregistered apartments.
“We’ve repeatedly been knocking our buyers to get their flats registered. But they pay no heed to our reminders because of the high registration fees (11.50 per cent),” General Secretary of Real Estate and Housing Association of Bangladesh (REHAB) Md. Wahiduzzaman said.
He said they have been requesting the government for several months for lowering fees for registration of transfer deeds in case of apartments.
The REHAB general secretary said the government earnings from the sector would certainly increase to a satisfactory level if the rate is fixed at a maximum of 6.50 per cent of costs of the property.
Currently, apartment buyers pay 11.50 per cent including gains tax at 3.0 per cent, stamp duty at 3.0 per cent, registration fee at 4.0 per cent and value added tax (VAT) at 1.50 per cent.
The registration cost is 7.5 per cent in Pakistan, 7.0 per cent in India, 5.0 per cent in Sri Lanka and 4.5 per cent in Nepal, according to the REHAB.
Around 15,000 flats are built a year in Bangladesh, the REHAB figures indicated.
“Thirty per cent of the apartments have remained unregistered,” another REHAB official said. He said the housing industry has been facing a serious blow since in July, 2010 when the government suspended fresh gas and power connections to the households.
He said high registration cost has also emerged as another setback for the industry.
Revenue collection from the land- and apartment-related deeds of transfer (buying or selling) in the capital also recorded nearly a 12 per cent fall to Tk 1.13 billion in January-May period of the current calendar year over that of Tk 1.30 billion earned in the last five months of 2012.
A sub-registrar of Dhaka said the amount that the directorate collected for registration-related purposes has declined because of some government steps for removing anomalies in the sector.
“There is no scope for fake documentation of lands as all kinds of updated documents are required for sales of land. It is another reason for the downward trend,” he said.
Md. Humayun Kabir, a lawyer of the Supreme Court, who deals with land-related matters, said the land sales have gone down significantly in recent months. People might have felt insecure to invest in land at the moment because of current confrontational of politics, he observed.
He also blamed lengthy procedure in mutation as it takes five to six months, causing sufferings to the buyers of land.
Meanwhile, other sources noted that many potential buyers of land and apartments “are not in a position” to show the fund, matching the deed value, because of a large amount of money remaining still undisclosed, for a variety of factors.
Such buyers fear about getting into tax-related troubles later on, if their wealth statements, submitted alongwith annual tax returns, do not provide reasonable grounds for explaining properly the sources of funds for purchases of land or apartments, the sources added.
The erstwhile fiscal concessions, the sources further pointed out, for investment of ‘undisclosed’ money or income in purchase of landed property and apartments exist no more.
Courtesy of The Financial Express
