The government has imposed a Federal Excise Duty (FED) on immovable properties through amendments introduced in the Finance Bill 2024.
This new measure marks the first instance of such a duty being applied to real estate transactions in Pakistan.
The Finance Bill 2024 stipulates that a 5 percent FED will be levied on the allotment or transfer of commercial property and the first allotment or transfer of residential property. The specifics of this implementation, including the mode, manner, and any conditions or restrictions, will be prescribed by the Federal Board of Revenue (FBR).
Finance Minister Mohammad Aurangzeb, in his budget speech, stated that this new duty aims to generate additional tax revenue for the upcoming fiscal year. He also emphasized that the FED’s introduction is part of a broader strategy to curb speculation in the real estate market.
“The FED has been introduced to stop speculation in the real estate industry,” Aurangzeb explained. By targeting speculative activities, the government hopes to stabilize property prices and reduce market volatility.
However, this new tax is expected to have a significant impact on the real estate sector. Industry experts warn that the additional 5 percent duty will increase the cost of immovable properties, potentially slowing down market activity.
“The imposition of FED will negatively affect the real estate industry as it will enhance the cost of immovable properties,” said a real estate market analyst. “This could lead to a decrease in transactions and overall market slowdown.”
Reactions from the real estate community have been mixed. While some acknowledge the government’s need to generate revenue and control speculative practices, others express concerns about the potential dampening effect on property investments and developments.
“The introduction of FED might deter both investors and buyers,” noted a real estate developer. “Increased costs could lead to a slowdown in new projects and a decrease in property transactions.”
As the Finance Bill 2024 moves forward, all eyes will be on the FBR to see how the new FED will be implemented and enforced. The government’s balancing act between generating revenue and maintaining a healthy real estate market will be closely monitored by stakeholders across the industry.
The impact of this new duty on Pakistan’s real estate sector remains to be seen, but it is clear that the Finance Bill 2024 represents a significant shift in the government’s approach to property taxation.
