Real Estate in foreign lands causing capital flight
| ISLAMABAD: Due to the absence of proper legislation in the country,
the government is unable to stop flight of capital from the country as
huge investment in real estate sector of Dubai, London and South Africa
continues, an official told the Daily Times on Tuesday.
A CBR investigation has revealed that companies based at Dubai not having their single office in Pakistan are persuading people in Pakistan to invest in the real estate sector of the UAE or other countries, including London.
An investigation report submitted to the government reveals that an attractive advertisement appeared in the local press in the last two weeks of September with a specific slogan through which people were invited to a marketing exhibition at local hotel in the last week of September.
Similar exhibitions were to be held in other cities. Acccording to the advertisement, properties in Dubai and London consisting of apartment buildings were advertised for sale. In order to get further information a local officer of this region was deputed for personal contact, obtain materials and submit his findings.
According to the inquiry of the officer, the promoter is a Dubai-based businessman and the services of a local firm were hired to brief visitors and investors. According to the advertisement, the properties in Dubai and London were being offered for sale:
Investment in property in London was a one-bedroom apartment from 190,000 pounds sterling, two bedroom apartment from 245,000 pounds sterling onwards and three bedroom apartment was offered for sale from 330,000 pounds sterling onwards.
The investment in the real estate sector of Dubai was offered as follows: furnished studio apartment 285,000 dirhams onwards, one bedroom apartment from dirhams 415,000 onwards and retail shop from dirhams 750 per square foot.
The inquiries so far have not been able to establish the existence of a permanent establishment in Pakistan and all activities of the promoters seemed to be direct.
On the specific question regarding the mode of payment, the promoter companys representatives are of the view that it could be transferred directly by the buyer in the account of the company or they were more than eager to transfer the funds through money changers. However, the promoters prefer cash payment in cash in any currency at their office at Dubai through Hundi arrangements.
The inquiry has reached the conclusion that the existing banking system with a porous policy of international money transfer facilitates the arrangements for foreign payments as described above. The provisions of Income Tax Ordinance of 2001 being weak rather non-existent while questioning international money transfers further encourages such deals.
Ironically, the bill on money laundering is still lying in the cold storage despite ratification of the FATF treaty by the government. The inquiry has suggested to the authorities that the problem needs to be tackled through a holistic approach by the government at the macro level.
Half-hearted attempts by the tax authorities to take such an initiative would be thwarted because of the loopholes in laws.
Despite the best efforts on the part of investigators, the inquiry has not been able to get the particulars of the people who indulged in the purchase of property in Dubai mainly due to the resistance on the part of local agents and also because of the legal provisions being insufficient and ineffective.
Article by: Sajid Chaudhry - www.dailytimes.com.pk