Defeating the qabza mafia.

Real estate has become everybody's favourite whipping boy, regarded as a parking place for black money and a playground for the qabza mafia with little or no knowledge on the subject. It is seen as a Ponzi scheme that markets have created. Yet when you begin to understand the problem, we see it is a mess created by flawed government policy made in a fragmented fashion by various layers of bureaucracy.

The government has done everything possible to ensure that the real estate market does not develop. And it continues to do so.

Why do we have a broken pricing system? Decades ago, unable to track prices, the District Collector (DC) announced a price that obviously was difficult to adjust as rapidly as the market moved. When the static DC rate is outstripped by the market rate by a huge margin and becomes obsolete, the Federal Board of Revenue (FBR) jumps into announcing prices which it tries to adjust unsuccessfully. Both rates are different from the market rate at which transactions take place.

Why we persist with these prices at a time when market rates are easy to reveal with some technology is astonishing, to say the least! With these rates, the government has clearly announced that all properties will be registered at the lower DC rate as it is a recognised government rate.

The real estate market can be built by removing the outdated FBR and DC rates

It is the government-announced rate, and it is accepted for property transactions. Since taxes are charged at the (lower) registration rate why would a buyer not register at the DC rate? Therefore, the announcement of the DC rate or FBR rate readily develops 'black market' flows.

Why do the rates persist? Real estate transactions are subjected to four types of taxes: the provincial government collects 'stamp duty' and 'capital value tax', while the federal government collects 'capital gain tax' and 'withholding or advance tax'. Therefore, provincial governments use the DC rate to calculate the tax liabilities and the federal government uses FBR valuation rates for taxes falling under its jurisdiction. Amazing and confusing!

So why not abolish the DC and the FBR rates? Pure inertia.

Why not just allow the rate at which the transaction takes place to be announced? They say it is because people will under-report the transaction. These days very simple mechanisms will allow

information to be fully revealed allowing us to abolish both the DC rate and the FBR rate and bring some sanity to the real...