Karachi, April 27, 2025 – The Pakistan Stock Exchange (PSX) has revealed a significant presence of undocumented wealth circulating within the real estate sector and has suggested several reforms to integrate this sector into the formal tax framework.
In its latest tax proposals for the 2025-26 federal budget, PSX emphasized the urgent need for bringing real estate investments under proper documentation and taxation.
According to the PSX, Real Estate Investment Trusts (REITs) offer an effective platform to formalize the real estate sector. REITs not only aid in documenting real estate transactions but also provide an opportunity for smaller investors to participate in real estate investments, ultimately helping reduce wealth disparity across Pakistan. PSX pointed out that encouraging REITs would align with the government’s priorities of developing a transparent real estate market.
The financial landscape shared by PSX highlights the dominance of real estate in Pakistan’s investment avenues. With a staggering Rs 90 trillion locked in real estate compared to Rs 30.28 trillion in bank deposits and Rs 14.5 trillion in PSX market capitalization, it is evident that real estate plays a crucial but largely undocumented role in the economy.
To address this, PSX has proposed several measures. Key among them is exempting advance tax on property transactions involving REIT schemes under sections 236A, 236C, and 236K of the Income Tax Ordinance. The exchange also recommended the removal of the sunset clause, which currently limits REIT incentives until June 2023, thus extending the benefits indefinitely.
Moreover, PSX suggested replacing the term “immovable property” with “real estate” in relevant sections of the law to better align with the updated Real Estate Investment Trust Regulations, 2022. It also called for Special Purpose Vehicles (SPVs) under REIT structures to receive equal tax treatment.
Promoting a documented real estate sector through these measures, PSX noted, would not only increase tax revenues indirectly but also stimulate investment from companies and institutional investors who demand transparency. Furthermore, aligning the Income Tax Ordinance with REIT regulations would correct existing anomalies and make the system more coherent.
In conclusion, PSX stressed that integrating real estate into the formal economy through REITs would support sustainable economic growth and provide a fairer investment environment for all Pakistanis.