KARACHI: The Federal Board of Revenue (FBR) has announced a significant tax incentive to promote affordable housing in Pakistan. According to official sources, the income tax on profits and gains earned by a person from low-cost housing projects shall be reduced by 50 percent.
This tax reduction has been granted under the Second Schedule of the Income Tax Ordinance, 2001, and is aimed at encouraging investment in the affordable housing sector by making such projects more financially viable for developers and investors.
To qualify for the 50 percent reduction in income tax, certain conditions must be met. Firstly, the housing project must be owned and managed by a company that is specifically formed for undertaking the said project. This company must be registered under the Companies Act, 2017, and must have its registered office located in Pakistan.
Secondly, the project must not be established by restructuring or dividing an existing business or through the transfer of previously used machinery or equipment from another business in Pakistan. This clause ensures that only genuinely new housing projects benefit from the tax relief, thereby avoiding misuse of the incentive by older or rebranded ventures.
Thirdly, the initiative must qualify as a “low-cost housing project.” Under this classification, the sale price of a single housing unit must not exceed Rs. 2.5 million. This condition is critical in targeting tax benefits to projects that serve the lower-income segment of the population, helping to alleviate the national housing shortage.
This move by the FBR reflects a policy push to promote economic activity in the construction sector while simultaneously addressing the country’s pressing need for affordable housing. The reduction in tax liability is expected to make such projects more appealing for private sector developers, potentially leading to an increase in the number of affordable housing projects launched across the country.