Increased tax, simplified services boost property registration revenues
The government has set a revenue collection target of Tk5,41,000 crore in the proposed national budget for the fiscal 2024-25
- Amount set to reach Tk22,000cr this fiscal, double in 2 years
- Further fillip expected from the new budget's proposal of allowing undisclosed money in plots, flats
The government's revenue from property registration is set to almost double in two years at the end of the current fiscal year which officials attribute to increased monitoring and measures taken to make the registration-related services easy and accessible.
Real estate investors hope the proposed budgetary provision to allow investment of undisclosed income in plot and flat will give a further boost to the growth of property registration revenue, a major source of tax income beyond the National Board of Revenue.
The revenue from the sector, which already surpassed the FY23 amount of Tk15,124 crore in the first nine months of FY24, is likely to reach Tk22,000 crore at the end of the fiscal year. This will be a significant growth from Tk11,600 crore in FY22, official data show.
The government has set a revenue collection target of Tk5,41,000 crore in the proposed national budget for the fiscal 2024-25. Of this, it proposed collecting Tk4,80,000 crore through NBR taxes, Tk15,000 crore from non-NBR taxes, and Tk46,000 crore from non-tax revenue.
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Real Estate and Housing Association of Bangladesh (REHAB) President Md Wahiduzzaman said the fiscal 2022-23 was an opportunity for black money investment and a good number of plots and flats were sold that year. The government earned good revenue from it.
"In the proposed budget for FY25, the opportunity to invest black money in housing will help generate more revenue, almost double the revenue of the current financial year," he said.
Law ministry officials say close monitoring ensures that registrations are based on the minimum market value and actual value of land in each area while sub-registry offices have been made more functional and easier for the public to access.
The officials say the government will soon bring all sub-registry offices under automation, which will generate even more revenue.
The Directorate of Registration, an agency under the Ministry of Law, manages the registration of documents for sale, purchase, and transfer of land, plots, and apartments. All sub-registries and district registrar's offices in the country are operated under the directorate.
Officials at the directorate say the majority of the revenue from the sector is generated from the registration of documents related to the sale, purchase, and transfer of land, plots, and apartments.
The sources of the revenue from the sector are stamp duty, registration fees, additional taxes, source tax, and local government taxes for the registration of land, plots, and apartments.
The ministry is working on a plan to automate the registration process. Pilot projects are underway in several upazilas. The government will soon bring all sub-registry offices under automation. It is expected that revenue will increase further once this is fully implemented.
Other reasons for revenue rise
The government in the national budget for FY24 increased the source tax and local government tax on land registration. The government decided to raise the source tax due to the practice of registering land at values lower than the actual market prices, the law ministry officials told TBS.
In the previous fiscal year, the registration fee for land registration was 1% of the value written in the deed, the stamp duty was 1.50%, and the local government tax ranged from 2-3% depending on the area. Besides, a source tax of 4% was applied to areas under Rajuk and the Chittagong Development Authority (CDA), and 3% for other city corporations and municipal areas.
In the FY24 budget, the source tax on land registration in areas under Rajuk and CDA was increased to 5%, while for other city corporations and municipal areas, it was raised to 4%.
Law Minister Anisul Huq told TBS, "The increase in annual revenue from the registration sector is attributed to several factors, including the positive impact of the country's development, the active functioning of sub-registries, and law ministry's close monitoring of document registration activities based on the minimum market value and actual value of land in each area."
The quality of service has improved in all sub-registry offices, and the overall environment is now more favourable, making it easier for the general public to access these offices, he said.
"The ministry is working on a plan to automate the registration process. Pilot projects are underway in several upazilas. The government will soon bring all sub-registry offices under automation. It is expected that revenue will increase further once this is fully implemented," said the law minister.
Officials from the law ministry and the directorate say the increase in source tax and local government tax for document registration alone has not resulted in a significant increase in revenue this fiscal year.
They say there was a downturn in all sectors of the country due to three years of Covid-19 and the impact of the Russia-Ukraine war. However, as the economy has started to recover since last year, the buying, selling, and transfer of land, plots, and apartments have increased. As a result, revenue earnings have significantly increased compared to previous years, say the officials.
Sheikh Kawsar Ahmed, senior vice president of the Bangladesh Registration Service Association, said the main reason for the increase in revenue from the registration sector is the effective efforts of the law ministry.
The ministry has undertaken several major initiatives for the development of this sector, among which a user-friendly registration system and easier services are noteworthy, he said.
"As a result, people no longer delay completing the registration process after purchasing land, plots, or flats. Consequently, revenue earnings are increasing consistently compared to previous years," said Kawsar.
Now, the minimum market rates set by the government for various types of land and land in different areas are not accurate. In many areas, nominal rates are determined. If the government determines the rational minimum market rates for land in each area, revenue income will increase further.
Major sources of the sector
According to official data, of the 36.5 lakh registered documents in the first nine months of FY24, approximately 35 lakh were related to the sale and purchase of land, gift deeds, "heba" deeds, exchange deeds, partition deeds, wills, decree documents, and agreements to sell deeds.
Approximately 1.75 lakh documents registered were for residential plots and flats. The remaining documents were registrations of various types of agreements and power of attorney documents.
During the period, revenue from land deed registrations alone amounted to approximately Tk10,000 crore. Revenue from the registration of sale deeds for residential plots and flats amounted to approximately Tk6,000 crore. The remaining revenue was generated from the registration of other types of documents.
Contribution to national budget
The government collects funds from various sources to allocate money for expenditures in the national budget, the size of which increases every year. The officials say a significant portion of the budget can be collected from the revenue generated from the registration of land, plots, and apartment transactions.
Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh, told TBS that the registration sector can become a major revenue contributor to the national budget.
"The government primarily relies on income tax to generate revenue for the budget. However, there is a significant shortfall in achieving income tax collection targets every year. While some sectors meet their targets, many others fall short. By prioritising the registration sector and ensuring efficient revenue collection, this sector can experience further growth," he said.
Former law minister Shafique Ahmed told TBS it is possible to increase revenue several times from the registration sector.
"People often conceal the true value of land or other assets to pay less tax and register transactions. Many times, registration is done based on the minimum market rate determined by the government according to the type of land and locality, which results in a significant shortfall in other fees allocated for registration, including taxes," he said.
He also said, "Now, the minimum market rates set by the government for various types of land and land in different areas are not accurate. In many areas, nominal rates are determined. If the government determines the rational minimum market rates for land in each area, revenue income will increase further."
