Pakistan’s real estate sector is set to get the uplift as International Monetary Fund (IMF), in a review meeting with Pakistani finance officials, signals 2% reduction withholding taxes, providing much-needed assistance to all property buyers nationwide.
Starting in April 2025, the Federal Board of Revenue (FBR) promulgated a reduction in withholding tax, which will activate investment opportunities and raise market confidence for first-time homebuyers and real estate investors.
The Association of Builders and Developers of Pakistan (ABAD) raised concerns about double taxation in Sindh and Punjab, where developers and housing societies were taxed during property registration at the initial allotment stage. Provincial tax authorities interpreted Section 236C of the Income Tax Ordinance, 2001, as applicable to these allotments, causing delays and uncertainty in transactions. In response, the Federal Board of Revenue (FBR) engaged in discussions with the International Monetary Fund (IMF) to seek reductions in withholding tax (WHT) rates for both buyers and sellers under Sections 236C and 236K. As a result, the IMF signals the approval of a 2% reduction for property purchasers.
Sorry Sellers: No Tax Break This Time
The International Monetary Fund agreed to decrease property purchase taxes but stood firm against lowering the taxation rates imposed on sellers through Section 236C. Thus, sellers’ present tax obligation remains unchanged, as they must continue to pay the existing rate.
IMF Gives Pakistan Breathing Room with Rs60 Billion Tax Target Slash
The IMF agreed to help Pakistan meet its fiscal targets by cutting the tax revenue objective to Rs60 billion for March 2025.
The experts predict that the concessional approach to Pakistani budget requirements will enable the completion of the staff-level agreement and documents on the Memorandum of Economic and Financial Policies before next week.
Power Sector Gets a Lifeline: PKR 1,257B Greenlighted by IMF
The IMF permitted Pakistan to draw PKR 1,257 billion from banking institutions to address the circular debt crisis in its electricity infrastructure. The borrowed liquidity stream will relieve power providers’ financial strain while benefiting all service areas.
Why This Tax Cut Could Spark a Real Estate Revival
- Insiders and stakeholders consider the tax cut to be a transformational change for the industry.
- The two per cent cut represents precisely what the real estate sector has been waiting for. The property developer based in Lahore explained that this move conveys the right signals to local and overseas Pakistani investors.
- Experts in the market expect the decreased tax obligation to produce the following outcomes:
- The purchase of properties must be actively promoted inside Karachi, Lahore, and Islamabad regions.
- As a result, local and overseas Pakistani investors will find buying property more reasonable.
- The government uses this measure to advance its plan to bolster economic growth by expanding housing and construction activities.
