On October 20, the Cantonment Board Clifton issued a public notice in newspapers for its residents that it has proposed a new assessment list for properties for the year 2022-23 in accordance with Section 66 of the Cantonment Act, 1924.

The CBC wants to revise how property is ‘taxed’ under Section 67 and 72 of the Cantonment Act, 1924. This is an exercise that is, however, being undertaken for all cantonments in Pakistan.

The people who are old residents of CBC discovered, however, that they were looking at as much as a 300% increase in the annual tax they paid on their property. The ‘tax’ is called annual rental value or ARV.

What is the new formula for property valuation?

An officer at the CBC Revenue Branch told Aaj News about the structure of the proposed way to assess the value of cantonment properties.

ARV or Annual Rental Value is calculated by adding the cost of land and cost of construction. The cost of land is calculated with the FBR’s rate of Rs73,125 per square yard. So:

Cost of land for a 1,000 sq yard plot = Rs73,125 x 1,000 = Rs73,125,000

Next you add cost of construction which is Rs2,500 per sq foot of how much your house’s covered area is.

Then you calculate your ARV:

• ARV = Cost of land or your plot + cost of construction / 20

The CBC officer said this total is then divided by 20 (although he could not explain why 20). That figure becomes your ARV. Now you apply the rebate rate on this ARV according to when your house was built.

The cantonment boards have introduced five ARV slabs, which starts from:

• Houses built between 1947 and 1992
• Houses built between 1993 to 2000
• Houses built between 2001 to 2010
• Houses built between 2011 to 2022
• Houses built between 2022 onwards

These slabs are not final. Residents can submit their reservations by Nov 19. The trouble is that many people don’t understand how this new formula is working. In fact, a lot of confused people had turned up at the CBC office. Many people have submitted their reservations to the CBC chief executive officer, Saleem Hassan Wattoo.

“We have to decide the fate of the proposed property assessment by Nov 19,” the officer said, adding after that the cantonments will send residents amended bills.

The officer explained that the CBC has a committee which has the right to provide a 10% rebate to any resident, who files a written application over the proposed ARV assessment. The cantonment’s vice president is on the committee.

The new slabs were introduced to end the disparity on properties and fix a uniform tax. “We have taken the FBR’s base rate (fixed rate) i.e. Rs73,125 per square yard,” he said. But while this is used to make the calculation, a rebate has been built into the formula.

The proposed rebate on ARV for the different slabs are: Residential units constructed from

• 1947 to 1992 will get a 85% rebate
• 1993 to 2000 will get a 85% rebate
• 2001 to 2010 will get a 80% rebate
• 2011 to 2022 will get a 65% rebate

New residential units constructed in 2022 will get a 60% rebate.

The result of all this is that older residents are having to pay more than they used to. If they had built their houses when cement and girders were cheaper, their cost of construction would have been lower.

According to DHA there were roughly 23,000 houses before the Musharraf era, mostly in Phases 1, 2, 4, 5. It has since grown to 44,000 new units as we have seen more people build in the newer phases.

One of the residents of DHA Phase II was upset with the proposed change: “Kisi nay Pindi me beth kar in ko patti parha di, aur inhon nay tax barha diya.” This person, who did not want to be named, said that CBC’s revenue collection for the year had already gone up from Rs2 billion to Rs6 billion in two years, but it still wanted more money from property tax.

Another resident said none of the people were consulted. “Legally they can do it, as the law allows them to increase or decrease the tax, but it is an unjustified act as they do not elaborate on the recent valuation structure,” he added.

Johar Iqbal, the convener of the FPCCI Real Estate Committee, also felt what was being proposed was unjustified. Iqbal argued that the cantonment boards already get 100% recovery of property tax in comparison with the rest of the city’s areas, which hardly get 20% of their annual property share.

He said the older residents are people who have retired and are not able to pay the property tax on the FBR fixed rate.

Johar Iqbal served as vice president of the Defense-Clifton Real Estate Association. He says there is an approximate 300% to 400% increase in the property tax valuation on old constructed residential units in DHA. He suggested that the cantonment boards should gradually implement the FBR base rate in ARV tax, but they have placed the entire DHA in the FBR A+ category.

Are cantonments legal?

We spoke to lawyer Abdul Moiz Jaferii about the new proposed charges DHA and CBC are levying on residents in Karachi. Actually, cantonments across the country are raising their property ‘taxes’. Jaferii argues, however, that if we go by DHA’s own law, the Cantonment Act of 1924, we find that all of this is illegal.

A cantonment is not a permanent settlement. It is set up where there is a need to use land for military purposes. It is temporarily allotted for military and military-related land use. And this is why it has classes, depending on grades of how sensitive the work is and the officers who do that work.

There is an understanding that as long as you need this land, you can take it from the federal government. And when you cease to need that land, you return it to the federal government. Just as the federal government issues a notification to announce the creation of a cantonment, it can issue a notification saying it it ending the cantonment. It declares the land normal land and returns it to the provincial government.

In all of this, the one common thread is that a cantonment is a special, temporary place to stay. The Supreme Court, when Justice Gulzar Ahmad was chief justice, at first superficially and then in detail towards the end of his tenure that there is no room in the law to slice up cantonments and sell them off, and therefore, all of these leases you are issuing under your sub-rules and by-laws are all in essence a contortion.

When the use of a cantonment to keep a tank, or a parade ground, or for other allied military functions, ends, then as happens across the world, you have to return that land to the civilian government. You can’t suddenly turn into a real estate agent and sell that land.

But since this is happening here, we try to find ways to innovate within the parent law, to convince ourselves that there was space to do what we are doing and that it is correct. This is how by-laws were made and leases were issued.

You granted permission to use land for a parade ground but then made an amendment and a golf club turned up there. When it did not stop at a golf club, you went ahead with a CNG station. Then came the shaadi halls. For a law whose ambit is kept with a parade ground in mind, you can only stretch it so much to stuff in a wedding hall. Then it becomes a bit absurd.

This is the same problem with Section 66 of the Cantonment Act, 1924. Nowhere does it say in the law that the dwelling if they are all army or army-related personnel who will live there.