In a landmark decision announced through the Budget 2024 – 25 of Pakistan, the federal government has officially abolished the Federal Excise Duty (FED) on the purchase and transfer of property. Effective from July 1, 2024, buyers of residential and commercial property will no longer have to pay the previously applicable 3 – 7% FED. This move, as confirmed by the Federal Board of Revenue (FBR), is expected to significantly reshape the real estate landscape across the country.
What Has Changed?
Prior to this amendment, anyone purchasing or transferring property in Pakistan was required to pay Federal Excise Duty, ranging between 3% and 7%, depending on the property type and transaction value. With the abolition of FED:
- FED on allotment and transfer of residential and commercial plots has been completely withdrawn.
- Buyers and investors will now experience a substantial reduction in transaction costs.
- The removal of FED aims to stimulate property transactions, encourage legal documentation, and promote investment in the real estate sector.
“Federal excise duty on the allotment and transfer of residential and commercial plots, imposed through the Finance Act, 2024, is now proposed to be withdrawn,” FBR Statement
Also read: Budget 2025 – 26 Faces Challenges but Offers Tax Relief to Revive Pakistan Real Estate Sector
Adjustments in Other Property Taxes
While FED has been abolished, certain other property-related taxes have been slightly modified under the Finance Act 2024-25:
Tax on Sale of Property
- For active filers, the tax rate has been reduced from 3% to 1.5%.
- For late filers and non-filers, the tax rates remain unchanged at 6% and 12%, respectively.
Tax on Purchase of Property
- For active filers, the tax rate remains steady at 3%.
- For late filers and non-filers, the rates continue at 6% and 12%, respectively.
The Impact on Real Estate Market
The abolition of FED is being widely welcomed across the real estate sector, which has long been burdened by high transactional costs, multiple layers of taxation, and regulatory complexities. Here’s a closer look at its expected impact:
1. Lower Transaction Costs
By eliminating the FED component, the overall cost of property transactions drops considerably. This directly benefits:
- First time home buyers
- Middle class families
- Real estate investors
- Developers acquiring land for projects
2. Boost in Real Estate Investment
With transaction costs lowered, many potential investors who were previously reluctant to enter the market due to high taxes may now reconsider. The real estate market in Pakistan could witness a surge in:
- Residential housing demand
- Commercial real estate investments
- Construction sector growth
- Ancillary industries like cement, steel, and interior design
3. The removal of FED might also encourage greater transparency and formalization in the property market, as buyers and sellers have less incentive to undervalue properties to reduce tax liabilities.
4. While the government may lose immediate revenue from FED collection, it expects to compensate through increased transaction volumes, leading to higher collections of other taxes such as Capital Gains Tax, withholding taxes, and registration fees.
Impact on Property Buyers and Investors
For property buyers, especially middle income groups, the financial burden of acquiring property has been eased. The abolition of FED means:
- More affordable property purchases
- Higher purchasing power for buyers
- Encouragement for individuals previously priced out of the market
For investors and developers:
- Improved feasibility for large scale projects
- Potential for faster project sales due to better affordability for buyers
- Increased liquidity in the real estate sector
What It Means for Non-Filers and Late Filers
While the FED abolition benefits everyone, non-filers and late filers will continue to face higher property transaction taxes:
- Non-filers pay 12% tax on both purchase and sale of property.
- Late filers pay 6% tax.
- The government continues to discourage non-compliance and incentivize tax return filing through this structure.
The Broader Economic Context
The government’s decision is part of a broader effort to stimulate economic activity, attract foreign investment, and boost the construction and real estate sectors, which are key drivers of employment and GDP growth in Pakistan.
With this move, the government hopes to:
- Revitalize the housing sector
- Support allied industries
- Create job opportunities
- Strengthen economic growth amid global challenges
With the removal of the Federal Excise Duty (FED), buyers can now save anywhere from 3% to 7% of the property value, a significant reduction in upfront costs. For example, on a property worth PKR 10 million, the FED would previously have added between PKR 300,000 to PKR 700,000 to the transaction. Now, that entire amount stays in the buyer’s pocket. This directly increases purchasing power, allows buyers to afford better properties or invest in additional upgrades, and removes one of the major financial barriers that discouraged many from entering the property market in the first place.
If you are someone who stands to benefit from this major tax relief; whether you’re a first time homebuyer, seasoned investor, or developer planning your next big project; Taz Group is here to guide you. With in-depth market knowledge, legal expertise, and personalized investment advisory, Taz Group can help you make the most of these new tax changes. From property selection to legal compliance and financial planning, our team ensures you explore Pakistan’s evolving real estate landscape with confidence.
Contact Taz Group today to schedule your free consultation and start capitalizing on these unprecedented savings opportunities.
