What to Consider Before Buying a House or Plot in Pakistan?

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Before buying a house or plot in Pakistan, it is crucial to consider various legal, financial, and practical aspects to ensure a secure and beneficial transaction. This guide covers key considerations from civil, tax, criminal, and other perspectives.

I. Legal Considerations

  1. Title Verification:
  • Registered Sale Deed: Ensure the seller has a valid, registered sale deed in their name. According to Ibrahim v. Second Sub‑Judge, First Class, Karachi, compliance with Section 16 of the Pakistan (Administration of Evacuee Property) Ordinance is essential to confer title to the evacuee property.
  • Mutation Records: Verify the property’s mutation records with the relevant land revenue authority.
  • Encumbrances: Check for any existing mortgages, liens, or legal disputes on the property that could affect its ownership.
  1. Power of Attorney:
  • If the transaction involves a power of attorney, confirm its validity and ensure it is not revoked. In Brig. MUHAMMAD MUZAFFAR versus GOVERNMENT OF PAKISTAN, it was emphasized that a General Power of Attorney must be strictly construed and does not automatically confer ownership rights.
  1. Due Process and Permissions:
  • Construction Approvals: Ensure that the construction of the property or any building plans adhere to local building and zoning regulations. As highlighted in Navid Hussain and others v. City District Government, construction approvals obtained in violation of regulations can be challenged.
  • Land Use Regulations: Verify that the property’s designated use aligns with your intended purpose (residential, commercial, etc.). The case of Haji Amin Versus Navaid Hussain and others notes that construction activities must adhere to approved building plans.
  1. Evacuee Property:
  • If the property is evacuee property, ensure all relevant procedures and confirmations have been completed. According to S.M. YOUSUF and another versus SETTLEMENT COMMISSIONER (SINDH) and others, all relevant arguments and legal precedents must be considered, and adherence to the terms of orders issued by the Supreme Court is needed in property disputes.

II. Financial Considerations

  1. Capital Gains Tax (CGT):
  • Be aware of capital gains tax implications on the sale of property. According to Mrs. T.P. BHANDARA versus EXCISE AND TAXATION OFFICER (CAPITAL GAIN TAX) LAHORE, tax officials have the authority to determine the fair market value of properties for capital gain tax purposes.
  • Shafqat Elahi Shaikh Versus The Deputy Commissioner of Income Tax clarifies that the intention of the taxpayer at the time of purchase is crucial in determining whether a property sale constitutes an “adventure in the nature of trade.”
  • Advance Tax: Be prepared to pay advance tax during the property registration. INCOME TAX ORDINANCE, 2001, Section 236C discusses the Advance Tax on Sale or Transfer of Immovable Property, requiring the person responsible to collect tax from the seller or transferor.
  1. Wealth Tax:
  • Understand the implications of wealth tax on the property. In W. T. As. Nos. 1271/LB and 1272/LB of 2002, it was emphasized that actual possession and full payment under a registered agreement of sale are sufficient to establish ownership for wealth tax purposes.
  1. Proper Declaration: Declare the purchase in your wealth statement and income tax returns to avoid penalties. According to Commissioner of Income Tax, Zone-C, Karachi Versus A. R. Hussain, disclosing all relevant facts in wealth statements is important.
  2. Tax on Immovable Property:
  • Be aware of property tax as Section 89 of The Islamabad Capital Territory Local Government Act 2015 mentions property tax collected by Metropolitan Corporation and Punjab Urban Immovable Tax act.

III. Criminal Considerations

  1. Fraud and Forgery:
  • Ensure that all documents are genuine and free from forgery. In cases such as GHULAM SARWAR Versus THE STATE, allegations of fraud and forgery are taken seriously, and the party must seek legal remedies in addition to criminal proceedings.
  • Syed FAYYAZ HUSSAIN ZAIDI v. S.H.O., POLICE STATION CHEHLIYAK, MULTAN reinforces that civil disputes should not be converted into criminal proceedings without sufficient evidence of dishonest intention at the time of the transaction.
  1. Illegal Dispossession:
  • According to Shahabuddin v. The State, the Illegal Dispossession Act, 2005, applies to illegal and unauthorized occupants to protect lawful property owners. The court underscores the Act’s purpose to discourage land grabbers and protect lawful property owners.
  1. Due Diligence: Exercise caution to prevent becoming a victim of fraud. The case of Abdul Sattar Shaikh v. Adeel Zahoor Malik and others highlights the importance of proving the authenticity of disputed documents with sufficient evidence.
  2. Pending Disputes: Be cautious if the property is already under dispute, as shown in Allah Ditta v. Director-General Multan Development Authority Multan and others, which suggests that complex property disputes are best addressed through a civil suit rather than a constitutional petition.

III. Other Considerations

  1. Location and Accessibility: Assess the property’s location in terms of its proximity to essential services, infrastructure, and security.
  2. Development Authority Involvement:
  • Be aware of disputes involving development authorities. In Sheikh GHULAM SHAH Versus K.D.A. and another, it was highlighted that the disposal of property belonging to statutory bodies like KDA must be in accordance with the relevant statutes. Disregard of such regulations can lead to legal challenges.
  1. Cooperative Housing Societies:
  • Cases, for example, Muhammad Ishaq and others v. Government of Punjab and others involve acquisitions of land for Cooperative Housing Societies.
  1. Pro Bono Publico:
  • In cases such as MUHAMMAD AFZAL—Petitioner versus PROVINCE OF PUNJAB and others—Respondents, the court clarifies that individuals acting as pro bono publico do not automatically have the right to challenge government decisions regarding property disposal, unless they have a vested right or can demonstrate a clear legal flaw in the process.

IV. Procedural Steps

  1. Document Verification:
  • Obtain copies of all relevant documents, including the sale deed, mutation records, and any other agreements.
  1. Legal Consultation: Engage a lawyer to review the documents and provide legal advice.
  2. Site Visit: Conduct a thorough site visit to assess the property’s condition.
  3. Payment: Make payments through documented and legal channels to ensure transparency.
  4. Registration: Ensure the property is registered in your name with the relevant authorities.

Conclusion

Purchasing property in Pakistan requires careful consideration of legal, financial, and practical aspects. Verifying title, understanding tax implications, ensuring due process, and maintaining transparency are crucial steps in this process. By adhering to these guidelines, you can mitigate risks and secure a sound investment.