Property Laws in Pakistan – Regulations & Transfers 2023
Written by: Neelam Shahzadi
Reviewed by: Majid Hussain
Property laws in Pakistan regulate transactions involving the sale, purchase, rent, mortgage, or lease of land, providing clarity on ownership rights and relationships. With countless properties existing in the country, clear ownership is crucial to prevent disputes and uncertainty. This article defines what land and property is in Pakistan and all property laws in the country.
Definition of Land and Property in Pakistan
In Pakistan, the terms “land” and “property” are often used interchangeably. However, they have distinct definitions according to Pakistan property law. Both these cannot be used interchangeably in property laws, technically, as they have separate and independent definitions.
In the country, “property” encompasses both tangible and intangible assets that can be owned by individuals. Tangible property refers to physical assets, whilst intangible property includes rights like patents and intellectual property. On the other hand, “land” is specifically defined as immovable property, making it a subset of “property” within the tangible category.
Property is then further divided into two categories—immovable and movable properties. Immovable properties encompass land, structures, and all the benefits derived from the land, including anything firmly attached to it. This classification includes land, buildings, and any advantages gained from the land, along with other fixtures connected to the earth. Hereditary allowances, rights of way, lights, ferries, and fisheries are also considered immovable property.
However, certain items are not classified as immovable property in Pakistan. These include standing timber, growing crops or grass, fruit on trees, and the juice within them, whether they are currently present or expected to grow in the future. Additionally, machinery embedded in the earth, especially if it is separate from the land in terms of ownership or treatment, is not considered immovable property.
Who Can Own Land in Pakistan?
According to Article 172, “Every citizen shall have the right to acquire, own, and deal with property in any part of Pakistan, subject to the provisions of this Constitution and any reasonable limits established by regulation in the interests of the public.”
In Pakistani laws, land and property affairs fall under the jurisdiction of the provinces, and each province has its own set of regulations regarding property ownership. As long as individuals, including foreigners, adhere to these regulations, they are eligible for property and land ownership.
The Constitution of Pakistan guarantees the right of every citizen to acquire, possess, and dispose of real estate property in certain regions of the country. If the property is located within a province, the ownership land law will be vested in the government of that province. In all other cases, the right of ownership will be held by the Federal Government.
The term “property rights,” on the other hand, encompasses the rights of individuals and organisations, including private ownership of a commercial property and other assets, to possess and utilise resources. However, the matter of property rights is intricate and requires a comprehensive evaluation, especially when dealing with land dispute cases in Pakistan, where the expertise of a lawyer is crucial.
Property Laws in Pakistan 2023
Despite the vast potential and opportunities in the Pakistan real estate sector, a significant number of prospective homebuyers lack awareness regarding the property sale purchase rules in Pakistan that regulate the buying and selling process, and other laws, which subject individuals and organisations when engaging in any property transactions. Here are some of the property laws in the country that every landlord, tenant, property owner, or lessee must know:
Transfer of Property Act 1882
The Transfer of Property Act 1882, as its name suggests, is a legislation that governs the sharing and transfer of properties in Pakistan, impacting the buying and selling processes. It safeguards purchasers by prohibiting unauthorised transfers that may result in losses on properties, such as shops or residential units. Transfer of property act Pakistan provides clarity on who can transfer properties, the transfer procedures, including oral transfers, and the types of properties that can be shared.
Throughout the past few years, a collective effort has been observed among provinces and federal territories to computerise land records, establishing streamlined management, title searches, and transfer procedures with the assistance of technology, exemplified by the CMS Punjab judiciary implementing an effective framework under the Punjab Land Record Authority Act of 2017.
The government has introduced a new provision through the Finance Bill 2023, requiring sellers of immovable properties to be levied tax under section 7E of the Income Tax Ordinance 2001 before registration or transfer. Under this tax law, any responsible party involved in property registration or attestation cannot proceed without evidence of estate tax liability fulfilment.
Starting from the tax year 2022, income specified under section 7E will be subject to taxation, as well as taxation of capital gains, at the rates specified in Division VIIIC of Part-I of the First Schedule, with a resident person considered to have derived 5 per cent of the fair market value of capital assets held in Pakistan, excluding specific situations, as taxable income.
Any property transfers must fall within three distinct scenarios to be considered legally valid. These include inheritance, where ownership is transferred upon the death of an individual; gifting, where property is transferred as a gift and which undergoes through the latest supreme court of Pakistan judgments on gift deed; and buying or selling, which involves the transfer of ownership through a real estate contract or transaction.
Stamp Act of 1899
The Stamp Act of 1899, enacted by the British-Indian government, continues to be in force in Pakistan as it tracks any property-related matters and directly impacts the government’s revenue. It provides a framework for the use of real estate tax stamps in property transactions, requiring buyers and sellers to contribute a specified amount to the government instead of using stamps on legal property documents in Pakistan.
According to Section 29 of the Act, the responsibility for paying stamp duty depends on the type of agreement involved. For instance, in administration bond agreement, lease agreement, and certificate of sale transaction, the payment responsibility falls on the respective parties involved.
The stamp duty amount varies based on the value of the document being stamped, such as land price in Pakistan. The prices may fluctuate due to inflation and government policies, but the overall regulation ensures that real estate transactions are officially validated through the use of stamps.
Registration Act 1908
Registration Act, also called enrollment action, was enacted to govern the registration of property, with the main objective being to establish the authenticity of property-related documents. This law aims to achieve proper documentation of properties or land acquisition, prevent fraudulent activities, safeguard the rights of property owners, provide title insurance, and ensure that registered documents hold legal validity in court.
Section 17 of the act clearly outlines which documents must be registered with the government and which ones are exempt. Failing to register property can have detrimental consequences, such as rendering a non-registered deed of adoption powerless and making a non-registered property legally ineffective and unable to be transacted for possession.
On the other hand, registration provides legal validity to the land, makes registered documents superior to oral agreements, and mandates the registration of agreements to sell for recognition by authorities. Whilst the Registration Act of 1908 is applicable nationwide, provinces have the authority to make minor modifications to its implementation in specific districts.
Land Revenue Act 1967
Recognised as one of Pakistan’s most consequential property laws, this act delineates the powers and jurisdictions entrusted to various land and revenue departments whilst addressing crucial aspects like revenue collection, surveys, boundary demarcation, partitions, arbitrations, and limitations.
The provisions outlined in the Punjab Land Revenue Act of 1967 provide guidelines for the collection of land revenue, which constitutes a quarter of the land’s produce and is paid by landowners to the government.
This legislation also encompasses the classification of Pakistani lands, demarcation of their boundaries, and the conveyance process of ownership. With its privileged status, the lambardar or village head wields significant authority, overseeing a cluster of 50 to 100 villages within the state and can make land reforms in Pakistan.
Joint Property Ownership
Joint Property Ownership legislation governs the co-ownership of a property by two individuals with two distinct forms. “Based on entirety” is applicable solely to married couples, enabling unilateral decision-making for personal portions of the property whilst requiring mutual consent for property sales or mortgages, and in the event of one partner’s demise, the surviving partner automatically inherits the deceased partner’s share.
Alternatively, “based on the rights of survivorship” permits this type of partnership among any individuals, granting equal rights proportional to their investments in the property, allowing certain unilateral actions without the other owner’s consent, although, similar to joint ownership, property mortgaging or sale needs the permission of both owners. Upon the death of one partner, the surviving partner must provide a death certificate to assume full ownership of the entire property.
Tenancy Laws
Landlords have the right to receive fair rent, implement eviction to their tenants according to the tenancy agreement, access the property for needed inspections or repairs regardless of whether they sub-let or rent the space fully, and obtain ROI. On the other hand, tenants have the right to a safe and habitable living environment, privacy, quiet enjoyment, and due process.
How Legend Properties Can Help
It is best to tread on real estate with all the right information that comes with investing in the sector. Property investors should work on the legal aspects alongside real estate lawyers and brokers to avoid messing with the property laws in Pakistan and incurring any legal implications.
Legend Properties has the most trusted real estate brokers in Pakistan, focusing on Islamabad properties. We instill confidence in our clients navigating the market as we are well-versed in all the ins and outs of the industry. Reach us today!
References:
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Govt Imposes Strict Condition for Property Transfers in Finance Bill 2023. (June 26,2023). Retrieved from Pro Pakistani:
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How to transfer property ownership in Pakistan | What you need to know. (March 17,2022). Retrieved from Graana:
https://www.graana.com/blog/how-to-transfer-property-ownership-in-pakistan-what-you-need-to-know/
Property Laws in Pakistan. (n.d.). Retrieved from Valid Laws: https://validlaws.com/property-laws-in-pakistan/
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Pakistan: Regulations and procedures governing the transfer of ownership of farm land. (n.d.). Retrieved from Ref World: https://www.refworld.org/docid/
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Experience hones, but constantly embracing learning and versatility is what brings you to the top. I have had several years of experience behind me regarding sales and team management in a handful of prestigious companies in the country, and even so, I yearn for further professional and personal growth; hence, the various trainings and courses I attended. Read More