In a move aimed at enhancing transparency and accuracy in real estate assessments, the Federal Board of Revenue (FBR) has announced a significant revision to property valuation rates in Karachi. The updated structure, detailed in SRO 144(I)/2025, supersedes the previous valuation outlined in SRO 1724(I)/2024 from October 29, 2024, and introduces a more nuanced approach to property valuation based on type, age, and location.
The FBR’s latest amendments seek to refine the valuation methodology for Karachi properties, ensuring that assessments more accurately reflect current market realities. The new framework provides a comprehensive breakdown of valuation rates, incorporating various factors to eliminate ambiguities and promote fair market-based evaluations.
Key Changes to Karachi Property Valuation Methodology
The revised SRO outlines specific guidelines and considerations for property valuation in Karachi, including:
General Valuation Principles:
- All property values are denominated in Pakistani Rupees.
- Valuation is calculated per square foot of the covered area, applicable to both the ground floor and any additional floors.
- Amenity plots will be valued at 50% of the residential plot rates for the corresponding area.
- Commercial property valuation is based on the covered area per square foot for all floors.
- Industrial property valuation considers both the entire plot area and the covered area per square foot.
Valuation of Multi-Storey and Built-Up Properties:
- Residential multi-storey buildings will see a 25% increase in value for each additional storey.
- Properties not clearly defined within existing categories will be valued at the highest adjacent property rate in Karachi.
- Land designated for multiple uses (residential, commercial, industrial) will be valued using an average of the applicable prescribed rates.
Special Valuation Considerations for Karachi:
- Basements in commercial buildings are set at 20% of the ground floor valuation.
- High-rise buildings, defined as having five or more floors above ground, are placed under a distinct valuation category.
- Flats and apartments are recognized as separate property units within the valuation framework.
- In multi-storey residential buildings, an “additional storey” is defined as containing both a bedroom and a bathroom.
Age-Based Depreciation Introduced for Fairer Assessments
A significant inclusion in the revised valuation system is the introduction of age-based depreciation. This acknowledges the natural depreciation of property value over time. The depreciation structure varies depending on the property type:
Depreciation for Residential Built-Up Property (Including Basement & First Floor):
| Age of Structure | Reduction in Value |
| Up to 5 Years | No reduction |
| 5 to 10 Years | 5% reduction |
| 10 to 15 Years | 7.5% reduction |
| 15 to 25 Years | 10% reduction |
| More than 25 Years | Valued as an open plot |
Depreciation for Flats & Apartments:
| Age of Structure | Reduction in Value |
| Up to 5 Years | No reduction |
| 5 to 10 Years | 10% reduction |
| 10 to 20 Years | 20% reduction |
| 20 to 30 Years | 30% reduction |
| More than 30 Years | 50% reduction |
Depreciation for Commercial Built-Up Property:
| Age of Structure | Reduction in Value |
| Up to 10 Years | No reduction |
| 10 to 15 Years | 5% reduction |
| 15 to 25 Years | 8% reduction |
| More than 25 Years | 10% reduction |
Location and Feature-Based Adjustments
The FBR has also incorporated adjustments based on property location and specific features:
- DHA Commercial Plots: Commercial plots in DHA facing any Khayaban (major road) will see a 15% increase in valuation.
- Commercial Building Upper Floors: Floors above ground level in commercial buildings will have a 25% reduction in valuation.
- Residential Plot Valuation Reductions (20%): Certain residential plots qualify for a 20% valuation reduction if they are:
- Facing a drainage channel (Nala)
- Facing a commercial area
- Located opposite a school, mosque, or graveyard
- Rear or triangular plots
- Rear Plots: Properties situated behind a front portion with limited access and no direct road visibility will also receive a reduced valuation.
Market Implications and Industry Reactions
These revisions to Karachi property valuations are poised to have a significant impact on the real estate market. The changes are expected to standardize tax assessments, reduce ambiguities, and establish valuations that more closely align with actual market values. This will directly affect real estate transactions, capital gains taxation, and overall fiscal planning for property stakeholders in Karachi, including investors, developers, and homeowners.
Real estate professionals have acknowledged the positive aspects of these revisions, particularly the introduction of age-based depreciation, which is seen as a welcome step towards aligning valuations with market trends. However, concerns have been raised regarding the potential increase in valuation for commercial properties in prime areas like DHA. Industry experts worry that increased valuations could lead to higher tax burdens, potentially dampening investment appetite in Karachi’s property sector.
The FBR has signaled its willingness to consider further adjustments based on stakeholder feedback. As Karachi’s real estate market digests these changes, all eyes will be on the implementation of these revised valuation rules and their subsequent impact on property taxation and investment dynamics.
