Karachi, July 11, 2025 — The Federal Board of Revenue (FBR) has once again brought Karachi’s real estate sector into the spotlight with significant tax changes introduced through the Finance Act, 2025, which directly impact the official property valuations used to calculate taxes on real estate transactions.
These reforms, now part of the Income Tax Ordinance, 2001, have revised tax rates on property transactions effective from July 1, 2025. Notably, the FBR has lowered the tax rates for property buyers while increasing them for sellers—a strategic move aimed at encouraging ownership and discouraging speculative selling.
These tax revisions will work in tandem with previously notified property valuations that the FBR has implemented to curb tax evasion and bring transparency to the real estate sector. On February 11, 2025, the FBR issued SRO 144(I)/2025, amending the official property valuations for Karachi. These rates serve as the minimum benchmark for calculating withholding tax on both purchase and sale transactions. If a declared property value falls below these official figures, tax will be levied based on the higher FBR-notified valuation.
This adjustment follows a broader valuation reform launched last year when, through SRO 1724(I)/2024 dated October 29, 2024, the FBR announced new property valuations for 237 areas in Karachi. These valuations aimed to bring declared prices closer to actual market rates, reducing opportunities for underreporting and illegal cash transactions.
According to FBR officials, undervaluation of property had become a key tool for tax evasion. Buyers and sellers often colluded to declare artificially low prices, depriving the national exchequer of billions in revenue. The revised valuation mechanism now ensures that taxes are collected based on a standardized, realistic pricing structure.
Experts believe these synchronized efforts—revised tax rates along with updated property valuations—will help formalize the real estate sector, increase tax compliance, and restrict illegal financial flows. While the market may initially experience a cooling effect, particularly in speculative investment segments, the long-term impact is expected to improve investor confidence and bring greater legitimacy to property dealings in Karachi.