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Real Estate Related Laws of Pakistan

| Gwadar Real Estate, Islamabad Real Estate, Karachi Real Estate, Lahore Real Estate | April 5, 2011

This overview explains procedure for sale/purchase of real estate in Pakistan, Gift of real estate in Pakistan, lease of real estate in Pakistan, mortgage of real estate in Pakistan and taxation of gains from real estate in Pakistan, taxation of real estate in Pakistan and set up of real estate investment trusts in Pakistan. These brief notes are for general guidance only and should not be taken as a substitute for thorough and professional legal advice.

Real Estate Related Laws of Pakistan

  • The Transfer of Property Act, 1882
  • Land Revenue Act, 1967
  • Stamp Act 1899
  • Registration Act 1908

Types of Real Estate in Pakistan

Sale of Real Estate in Pakistan
Sale of real estate in Pakistan normally takes place through a title document known as a Sale Deed, except in certain cases e.g. purchase of real estate in Defence Housing Authority (DHA) or in a housing society where sale deed is not executed for transfer of title in real estate and an allotment letter/transfer letter from the authority or the society, as the case may be, is deemed to be the title document. Some people, before execution of the sale deed, may opt to execute an agreement to sell. However, such agreement to sell does not transfer title to a property in favour of the vendee. It, nevertheless, does create a right in favour of the vendee, in case the vendor refuses to honour the terms and conditions of the agreement, to seek specific enforcement of the agreement to sell. Title in an immovable property is only deemed to transfer once such Sale Deed or title document has been executed. A sale deed must be affixed with requisite stamp duty and it must be registered with the relevant sub-registrar. After registration of the Sale Deed with the sub-registrar it must be ensured that a mutation of such sale is entered in the register of mutations kept and maintained by the patwari.

Purchase of Real Estate in Pakistan
Before purchasing real estate in Pakistan, a complete and thorough search in respect of title of the seller to the real estate must be carried out. A general practice is to investigate title of the current vendor and any previous owner(s) for the last 20 years. Original title document in favour of the vendor must be obtained alongwith other relevant documents including mutation in favour of the vendor, a fresh copy of fard, aks shajra and NOC/NEC as the case may be.

If the vendor is selling the property in the capacity of an attorney of the owner then it must be ensured that the power of attorney is affixed with appropriate stamp duty and it has been duly registered with the relevant sub-registrar. If possible, contact should be made with the owner(s) of the property and authenticity of the power of attorney must be confirmed. A holder of a forged and fabricated power of attorney may not be able to transfer a valid title in an immovable property to a third party.

Non-resident Pakistanis, overseas Pakistanis and foreigners may also purchase immovable property in Pakistan. Their presence in Pakistan at the time of execution of the title document is not necessary.

Lease/Renting out of Real Estate in Pakistan

Landlord’s Point of View
Landlord must ensure that lease of an immovable property is executed in writing. Lease of immovable property for a period of less than a year does not require compulsory registration. However, lease of immovable property for a period of more than a year must be registered.

If the tenant refuses to pay rent, or for any other reason as stated in the lease agreement and allowed under the law, the landlord may terminate the lease. If the tenant refuses to vacate the premises the landlord may file an ejectment petition before the relevant rent controller.

Tenant’s Point of View
Tenant must ensure that he makes payment of the rent either through a crossed cheque, or where payment is made through some other mode, then a receipt must be obtained from the landlord. In case the landlord unlawfully or unjustifiably attempts to evict the tenant, the tenant may file a petition before rent controller in addition to availing other legal remedies as advised by his counsel.

Gift of Real Estate in Pakistan
Gift of real estate in Pakistan must be made in writing. There is, however, a qualification to this general rule in case of a Muhammaden. A Muhammaden may make an oral gift of an immovable property. Although allowed under law, it is not recommended to make oral gifts of immovable property because it may become difficult to prove an oral gift. Where a gift deed is executed, it must be affixed with appropriate stamp duty and it must be registered.

An oral gift, in case of a Muhammaden, takes effect if all three of these under mentioned conditions are satisfied:

  • Declaration of gift
  • Acceptance of the gift by the donnee during the lifetime of the donor
  • Transfer of possession of the subject matter of the gift by the donor to the donnee

Once all of the above-mentioned conditions are satisfied, then the fact of a gift is deemed to be established.

Mortgage of Real Estate in Pakistan

Legal Mortgage
A legal mortgage in respect of an immobile property may be created after execution of a mortgage deed. A mortgage deed must be affixed with appropriate stamp duty and it must be registered with the relevant sub-registrar.

Equitable Mortgage
An equitable mortgage in respect of an immovable property may be created simply by deposit of original title documents e.g. sale deed, allotment letter, etc., with the mortgagor. It is not required to be registered, however, a general practice is to get a lien marked in respect of such mortgage.

Real Estate Taxation in Pakistan

Taxation of Gains from Real Estate in Pakistan
The Constitution excludes legislation on taxation of capital gains from the purview of the federal government. The income tax law has also been harmonized with these constitutional provisions by excluding the immovable property from the definition of capital asset, whose gain is liable to tax.

Despite this, profits on some transactions concerning immovable property is taxable under the income tax law e.g. disposal of property acquired as a stock in trade or with commercial intent to make profit. However, gains realized on disposal of immovable property transferred as a consequence of family inheritance, gifts or without commercial motives, or the property held as a business capital asset are exempt.

Capital Value Tax on Real Estate Related Transactions in Pakistan
A Capital value tax at the rate of 2 percent of recorded value has been levied vide Finance Act, 2006. This is applicable in urban areas for residential property exceeding an area of one kanal and in case of commercial properties without any threshold of land area or size of the property. However, where the value of such property is not recorded, the CVT is payable at Rs. 50 per square yard of land area. All transfers falling under the scope of purchase, gift, exchange, surrender, power of attorney and relinquishing the rights have been subjected to the capital value tax. However, transactions between spouses, parents, grand parents, brothers and sisters through gift and inheritance have been excluded from its purview.

Establishment of Real Estate Investment Trust in Pakistan
The concept of Real Estate Investment Trust has recently been introduced in Pakistan as an incentive for real estate investment in Pakistan. Any income of such trust is exempted from tax, subject to the condition that not less than 90 percent of its profit of the year is distributed amongst the unit holders.

Source: Tahseenbutt.com

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Pakistan Property & Real Estate FAQs

| Bahria Town (Pvt) Limited, Defence Housing Authority, Gwadar Real Estate, Islamabad Real Estate, Karachi Real Estate, Lahore Real Estate | April 5, 2011

Q. What is Aks-Shajra?

A. Aks-Shajra means image of a specific piece of land/specific khasra number from the map/plan of an estate or village defining its boundaries.

Q. What is meant by Fard Malkiat?

A. Fard Malkiat also known as (Record of Rights/ Jama Bandi/Misal Haquiat/ Register Haqdaran-e-Zameen) maintained for determination/record of various types of rights in the immovable property.

Q. What is Mutation (Intiqal)?

A. Mutation is a document containing an order by a revenue officer; who must be at least an Assistant Collector of grade III, whereby an entry in the record of rights is to be altered, changed or mutated in revenue record.

Q. What is meant by Tattima Registry?

A. Tattima means “supplementary” and Tattima Registry means supplementary sale deed in specified area.

Q. What is meant by Khasra?

A. Khasra is a piece of land with specific measurements and a specific number.

Q. What is Khasra Garrdwari?

A. Register Kharsa Gardwari is a register maintained for record of possession/cultivation.

Q. What is meant by Survey?

A. A drawing or map showing the precise legal boundaries of a property, the location of improvements, easements, rights of way, encroachments, and other physical features.

Q. Is mutation is a title document?

A. No, mutation is not a title document.

Q. What is the name of the document, which creates title in immovable property?

A. Register Sale Deed (Registry /Baye-Nama) is a document, which creates a title in the immovable property.

Q. What is meant by Conveyance Deed or Sale Deed?

A. Conveyance Deed or Sale Deed is a deed document by which the title of property is conveyed by the seller to the purchaser. Conveyance is the act of transferring ownership of the property from a seller to the buyer. Deed document will help you ascertain whether the property, which you are buying, is on land belonging to any development authority, society, builder in which the property is located, whichever the case may be.

Q. From where I can obtain my house documents or title deeds of my property?

A. You can obtain your house documents or title deed documents from office/department by which title of the house was conferred or transferred.

Q. What laws generally deal with real estate in Pakistan?

A. Among the laws, which deal with real estate in Pakistan, are The Transfer of Property Act, 1882, Land Revenue Act, 1967, Stamp Act, 1899 and Registration Act, 1908.

Q. What safety precautions should I take before buying property or real estate in Pakistan?

A. Before buying property in Pakistan a complete and thorough probe in respect of title of the seller to the real estate must be carried out. A general practice is to investigate title of the current seller and any previous owner. Original title document in favor of the vendor must be obtained along with other relevant documents including mutation in favor of the vendor, a fresh copy of fard, aks shajra and no-objection certificate or non-encumbrance certificate as the case may be. If the vendor is selling the property in the capacity of an attorney of the owner then it must be ensured that the power of attorney is duly registered with the relevant sub-registrar. A holder of a forged and fabricated power of attorney is not at all able to transfer a valid title in an immovable property to a third party.

Q. In name of a Company, property is registered before purchasing it, what documents should I inspect?

A. Before purchasing property from a company you should verify from the Registrar of Companies at Securities & Exchange Commission of Pakistan that the property is not mortgaged or is not being used as a security against a loan, otherwise it will not be considered as a freehold property. In addition, check memorandum of association that who is authorized to act on behalf of company for selling the property, if resolution is required then the same must be passed and verified. Further, inspect original title documents from the selling company.

Q. Can corporate bodies use residential properties as office space?

A. It is illegal to put residential properties to commercial use. However, service-based industries are allowed to operate from residential areas.

Q. Can foreigners buy Property in Pakistan?

A. Yes, foreigners can buy property in Pakistan but after completing all legal formalities.

Q. What inheritance laws apply in Pakistan?

A. Inheritance laws in Pakistan depend on religious affinities, Muslim Personal Laws for the Muslims and persons other than Muslims their personal laws.

Q. Is transfer of every immovable Property needs registration in Pakistan?

A. Transfer in the case of immovable property of the value of Rs 100/- and upwards only be made by a registered sale deed.

Q. An overseas Pakistani without visiting Pakistan can buy Property?

A. Yes, without coming to Pakistan an overseas Pakistani can buy property in Pakistan.

Q. What are the documents required to legally own a house?

A. Any deed verifying transfer in your favour i.e. sale deed, allotment letter and sale certificate.

Q. How do I own a house?

A. You can own house by purchasing from a private person, private builder, by allotment or purchase from public authority i.e. any development authority (LDA, CDA, FDA, MDA etc.) and by becoming member of any co-operative housing society.

Q. What is Power of Attorney?

A. Power of Attorney is the power given to an agent by the principal to execute several acts and deeds for and on behalf of the principal. A power of attorney may also be given by a person to another to appear before any Court, Tribunal and Authority, buy sell, maintain real estate etc. When power is given in respect of a number of acts in a number of transactions, it is called General Power of Attorney and when power is given in respect of a particular act pertaining to one transaction; it is called Special Power of Attorney. General Power of Attorney must be registered.

Q. Person holding Power of Attorney can transfer property in his name?

A. No. The person who is holding Power of Attorney has a fiduciary duty to act in your interest and try to do what you would do for yourself if you were able. Third parties will presume the person is acting on your behalf.

Q. Can I revoke my Power of Attorney?

A. Yes.

Q. When would a Power of Attorney gets cancelled?

A. Power of Attorney automatically gets cancelled on the death of Executants’ and when get cancelled by the Executants’.

Q. Is my Power of Attorney effective after I die?

A. No, Power of Attorney will ends upon your death.

Q. I am going to buy a flat in a building under construction, what are the papers should I check?

A. Check approved plan of the building along with the number of floors; ensure that the floor that you are buying is approved. Check if the land on which the builder is building is his or he has undertaken an agreement with a landlord. If so, check the title of the land ownership. Check the building byelaws as applicable in that area and ensure that the building is without any violation of front setback, side setbacks, height, etc. Check specifications given in the agreement to sell and that given in the brochure and see if he is providing the same actually on the ground or not. If the builder is a company incorporated with Securities & Exchange Commission of Pakistan, it may be checked that the company is allowed to do the business of sale and purchase of real estate.

Q. Can immovable property be sold while it is mortgaged?

A. No, immovable property cannot be sold.

Q. What are important documents one should check before buying any property?

A. Check approved layout plan, approved building plan, ownership documents, ask for all the deeds of title related to the property to be purchased, examine the deeds, ascertain the survey number, check previous encumbrances and loans, if any, on the property, request vendor(seller) to obtain, if applicable, consent permission, sanction, no objection certificate of various authorities, tax receipts and bills, measure the land etc.

Q. What is stamp duty and who is liable to pay the stamp duty, the buyer or seller?

A. Stamp duty is a fee/tax levied by the government on transfer of property and must be paid in full and on time. A stamp paid document considered proper and legal document. The liability of paying stamp duty is that of the buyer unless there is any commitment to the contrary.

Q. How to get approved building plan and why it is necessary.

Raising construction without having a building plan approved from the concerned agency is a violation of rules of the concerned Building Control Authority and can lead to demolition of construction. Therefore, for all practical purposes i.e. before raising construction approval for the same is mandatory.

Q. In Pakistan who maintains Land Record?

A. In Pakistan land records are maintained by district administration revenue department for deciding ownership and boundaries of land or property.

Q. I am a co-sharer in a property can I sell the said property?

A. Yes, you can sell the property but only to the extent of your share in the property and without specific boundaries unless consented expressly by the other co-sharer or co-sharers.

Q. Whether a sale deed drafted by a Wasiqa Nawees/Arzi Nawees is reliable?

A. No, sale deed must be drafted by a lawyer having knowledge of the relevant laws regarding transfer of property.

Q. What are essentials of Gift?

A. Essentials of gift are 1. Offer by the Donor (owner) 2. Acceptance by the Donee (to whom gift is being made) and 3. Delivery of possession.

Q. Can gift be revoked?

A. Yes, gift can be revoked except if made in favor of a person who falls in prohibited degree i.e. a person with whom marriage cannot be contacted.

Q. What are distinguishing features of gift from those of will?

A. Gift always can be made in the lifetime and it become effective at the very moment when it is complete, whereas will only can take effect after death of its maker. Other distinguishing feature is that an owner of property can make gift of his entire property in favor of a legal heir of him/her in his life time but he cannot make a will whereby the whole property is intended to be given to one legal heir. He/she can make will to the extent of 1/3rd of his/her holding in favor of any who is not legal heir and if made in favor of a legal heir then requires agreement/consent of other legal heirs.

DISCLAIMER: This information contained herein are intended for informational purposes only and should not be construed as legal advice.

Source: AMLAW.Pk

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