Due to taxation measures introduced in recent years, property buyers are facing significant challenges in the current market.
The heavy tax burden has discouraged many from purchasing property altogether. However, the upcoming 2025-26 budget is expected to bring major relief for property buyers. According to FBR sources, discussions are underway regarding certain tax concessions, including possible tax exemptions for first-time property buyers.
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Tax Burden Slowing Down Real Estate Sector
Sources indicate that the primary reason behind the real estate sector’s current stagnation is excessive taxation, leading to a sharp decline in property transactions. The government is seriously considering recommendations from the Federation of Pakistan Chambers of Commerce and Industry (FPCCI). These proposals, part of FPCCI’s 2025-26 budget recommendations, aim to boost economic growth and investment in real estate.
Concerns Over Double Taxation
As per FPCCI, filers currently pay a 3% advance tax on property purchases. FPCCI has raised concerns that this amounts to double taxation, as the income used for purchasing property has already been taxed. This additional financial burden discourages investment and negatively impacts market activity.
To address this, FPCCI has proposed:
Reducing the advance tax for first-time filers to 0.5%
Complete exemption for salaried individuals, as they already pay income tax, and additional tax burdens are unfair
Call to Abolish Section 7E of Income Tax Ordinance
Apart from tax reduction, FPCCI has also demanded the abolition of Section 7E of the Income Tax Ordinance 2001. This section imposes a deemed income tax on capital assets, acting as a major hurdle to real estate investment in Pakistan. FPCCI argues that removing Section 7E will:
Solve the double taxation issue
Improve the investment climate for property buyers and investors
Boosting Investment & Market Transparency
FPCCI believes that eliminating Section 7E will encourage investment in real estate, making homeownership more accessible for the middle class and salaried individuals. Additionally, removing this tax will help formalize the real estate industry, enhancing transaction transparency and documentation.
Economic Growth & Foreign Investment
FPCCI emphasizes that tax reforms will attract domestic and foreign investment in Pakistan’s real estate sector, which is crucial for economic stability. The federation has urged the government to incorporate these recommendations into the upcoming federal budget, recognizing the real estate sector as a key pillar of national economic growth.