FBR Plans Tax Incentives for First-Time Property Buyers

The Pakistani Federal Board of Revenue is planning to allow significant tax incentives for first-time homebuyers. This initiative aims to reshape the construction and property market of Pakistan. The Chairman of FBR Rashid Mahmood has agreed to review the taxes amount on the sale and purchase of the properties. This tax relief would decrease the taxes in every transaction, promote affordable housing, and increase the demand to buy homes in Pakistan.

Current Rate of Property Transaction Taxes

Presently, the transactions in Pakistan bear the burden of 13% per transaction. It contains 4% withholding taxes through Sections 236C and 236K within the Income Tax Ordinance and 5 % FED is imposed on real estate transactions. It also includes 4% provincial stamp duties. This over-taxation has been considered one of the core barriers for first-time homebuyers. It is examined that the burden of taxes slows down the real estate industry.

What are the plans to provide Relief from Transaction Taxes?

Chairman Rashid Mahmood understands this decline in the real estate market of Pakistan and said in the meeting of the Task Force for Housing Sector Development, “We are determined to rationalize taxes for the property buyer so that the first-time home buyer can get it at an affordable cost.“
To achieve this, FBR is discussing withholding taxes and 5% FED depending on cooperation by the provinces so as not to affect the remaining tax levels.

Overcoming the Challenges of Property Valuation

The proposed revisions also focus on the property valuation rates that should be aligned with market values. For this purpose, a committee has been created headed by the FBR’s Member (Policy) and comprising real estate housing experts. The committee’s responsibility is to carry out annual reviews of valuation rates and introduce a transparent mechanism in collaboration with Inland Revenue Operations.
The goal is to bridge the gap in property assessments and to make sure that property taxation is fair across the board.

Streamlined Procedures for Overseas Buyers

Furthermore, the meeting also discussed how transactions can be hassle-free for overseas Pakistani buyers. Mahmood stated “We are planning to introduce an online system to simplify the procedure of purchasing property for non-resident buyers with the cooperation with NADRA. It would reduce reliance on field offices.”
On the other hand, FBR has confirmed that it would not provide any concession to the non-filers and continue its hard stance on tax procedures under Section 7E.

Section 7E Income

In the meeting, concerns were raised about the income tax on estimated income under Section 7E. The tax does not apply to properties generating taxable income, which affects idle and undeveloped plots. The stakeholders claim that it could lead to double taxation on idle properties. Chairman Mahmood acknowledged it and said that the tax on deemed income will be re-evaluated to address these instabilities.

Optimism for February 2025 Reforms

The proposed incentive plans are supposed to be addressed by February 2025, which offer tax relief for first-time homebuyers and promote investment in affordable housing projects.
Real estate professionals are hopeful regarding the proposed measures. A representative of the Federation of Realtors Pakistan said “It could be a turning point for the real estate industry as it offers relief to buyers and stimulates real estate market growth“.

A Brighter Future for Pakistan’s Housing Sector

Federal Board of Revenue’s hard effort to tackle the challenges of taxation brings hope to the horizon of the real estate market of Pakistan. These tax exemptions for real estate buyers establish a new era of growth and accessibility and pave the way for a stronger and more inclusive housing market.