In a significant development, the government is reportedly considering the withdrawal of the Federal Excise Duty (FED) on property transactions. While this move has been welcomed by industry leaders, real estate experts believe it alone will not be enough to spark meaningful activity in the sector.
Hassan Bakshi, Chairman of the Association of Builders and Developers of Pakistan (ABAD), acknowledged the positive intent behind the proposed FED removal. However, he emphasized that a deeper overhaul of the overall tax structure, which currently imposes up to 15% on property transactions for tax filers and 35-40% for non-filers, is crucial for true market recovery.
“Removing FED is a good first step,” said Bakshi, “but unless the total tax burden is reduced, the market won’t see significant movement.”
Support for Overseas Pakistanis
Bakshi strongly advocated for equal tax treatment for overseas Pakistanis, regardless of their filer status. He suggested a practical approach: allow non-filer expatriates to invest at filer tax rates and require them to obtain a National Tax Number (NTN) within a short grace period. This simple change could unlock massive investment potential from the 10 million Pakistanis working abroad.
Why Investors Prefer Dubai
The conversation inevitably turned to why Dubai is attracting Pakistani real estate investors. The reasons are clear:
- Transparent ownership structures
- Digital processes
- Quick legal resolutions
- A consistent 4% transfer tax regardless of filer status
- A stable currency and investment environment
These factors, Bakshi explained, offer certainty—something that’s currently lacking in Pakistan.
Unlocking Economic Potential
Bakshi also pointed out that real estate is an economic multiplier, driving over 60 allied industries such as cement, steel, tiles, and sanitary ware. He estimated that if these sectors operated at 80% capacity, the government could generate up to Rs2 trillion in additional tax revenue.
He criticized the recent Rs60 increase in cement prices despite falling inflation and interest rates, calling it a burden on construction costs at a time when the sector needs support.
Calls for Affordable Housing & Subsidies
To make real estate more accessible, especially for first-time homebuyers, Bakshi proposed government backed subsidized home loans. He also recommended redirecting a small portion (10%) of the Rs461 billion Benazir Kafalat Programme towards a Benazir Housing Subsidy Programme. This would empower more people to own homes without placing significant financial strain on the state.
“Housing isn’t just a need, it’s a right,” said Bakshi. “With the right policies, we can make homeownership a reality for millions.”
Investor Confidence and Policy Stability
Shaban Elahi, President of the Pakistan Real Estate Investment Forum (PREIF), echoed these sentiments. He stressed the importance of policy consistency and reduced taxation to attract both local and overseas investors.
“Unpredictable policies and excessive taxes drive investors away,” Elahi noted. “What we need is a clear, long term policy roadmap, something that remains stable for at least 5 to 10 years.”
He recommended reducing advance tax rates under Sections 236C and 236K to 1%, arguing that lower tax rates would lead to higher transaction volumes and more revenue in the long run.
Systemic Issues: Beyond Taxes
Other industry experts pointed out that taxes are just one part of the challenge. Adeel Ahmed, a seasoned real estate professional, highlighted systemic issues like corruption, delays in development projects, and bureaucratic inefficiencies.
“The government needs to restart stalled developments in areas like Taiser Town and Hawke’s Bay,” he said. “It’s not just about taxes, it’s about rebuilding trust.”
Ahmed also emphasized that tackling corruption during property transfers and ensuring transparent processes is just as vital as fiscal reform.
Conclusion
The real estate sector in Pakistan stands at a crossroads. While eliminating the FED is a welcome move, stakeholders unanimously agree that comprehensive tax reforms, policy stability, transparent systems, and support for overseas investors are essential for sustainable growth.
It’s time for a bold, integrated approach that goes beyond quick fixes, one that truly revitalizes Pakistan’s real estate landscape and contributes meaningfully to national economic recovery.
