In a long-awaited move, the federal government has introduced partial tax relief measures for the real estate sector in Pakistan as part of the Budget 2025, aiming to boost investment and facilitate smoother property transactions. However, industry experts remain skeptical about the true impact of the reforms.
During his budget speech, Finance Minister Muhammad Aurangzeb announced a significant reduction in the withholding tax rates on property purchases. The revised rates are as follows:
- Transactions up to Rs50 million: reduced from 4% to 2.5%
- Transactions up to Rs100 million: reduced from 3.5% to 2%
- Transactions over Rs100 million: reduced from 3% to 1.5%
Additionally, the 7% Federal Excise Duty (FED) on property transactions has been abolished. Stamp duty in Islamabad has also seen a major cut, dropping from 4% to just 1%. These measures are expected to reduce transaction costs for buyers and possibly encourage more investment in real estate.
The budget also outlines tax relief based on three property transaction slabs:
- Up to Rs50 million
- Up to Rs100 million
- Above Rs100 million
However, alongside these concessions for buyers, the government has increased taxes for property sellers. The new tax rates are:
- 4.5% for transactions up to Rs50 million (up from 3%)
- 5% for transactions between Rs50 million and Rs100 million
- 5.5% for transactions exceeding Rs100 million
Moreover, the budget introduces tax credits for housing units up to 10 marlas and apartments up to 2,000 sq. ft., which may bring some relief to genuine homebuyers.
Perhaps the most controversial move is the restriction on property purchases to tax filers only. Starting July 1, non-filers will be barred from purchasing property, vehicles, or opening bank accounts. This has sparked criticism among both realtors and the public.
Akbar Sheikh, former chairman of the Association of Builders and Developers (ABAD), questioned the effectiveness of the budgetary measures. “How can the sector revive if relief is given to buyers but not to sellers? Property transactions require both parties,” he said. He also expressed concern about the vague language in the budget regarding the FED, especially on residential plots and houses.
Another real estate expert, Asad Tariq, highlighted the damage this policy could cause, stating that requiring filer status could exclude a large portion of the population from the real estate market. He also raised concerns about the additional burden of disclosing asset details in income tax returns.
While the government claims these steps will inject new life into a stagnating sector, many believe that the budget fails to address the core challenges faced by real estate stakeholders. Clarity is also demanded on several fronts, particularly the applicability of the FED abolition and the exact implementation criteria for tax credits.
For now, industry players await further explanation from the authorities, hoping for balanced policies that truly revive one of Pakistan’s most vital economic sectors.
