Prime Minister Shehbaz Sharif has opted to postpone a decision on the proposed tax incentive package intended for the real estate sector, highlighting the necessity of tackling crucial issues prior to moving forward.
Sources reveal that the Federal Board of Revenue (FBR) has rejected a proposal to provide tax exemptions of up to Rs. 50 million for first-time buyers of homes, shops, or offices. The FBR cited a restriction imposed by the International Monetary Fund (IMF) against such exemptions as the reason for this decision. FBR Chairman Rashid Langrial argued that the proposed relief would effectively amount to tax evasion, making it unacceptable under IMF guidelines.
Discussions on Tax Cuts and Abolishing FED
During a meeting of the housing sector task force, officials explored the potential for reducing property transaction taxes and eliminating the 3% federal excise duty (FED) on real estate transactions. While the FBR chairman supported the removal of the FED, some task force members expressed concerns that tax cuts might trigger speculation within the real estate market.
The government is also evaluating the introduction of interest rate subsidies to improve the affordability of home loans for low- and middle-income buyers, aiming to enhance housing access.
Pakistan’s real estate sector is largely unregulated, with agricultural land frequently converted into housing societies without the necessary approvals. The market is plagued by fraudulent sales of plots and apartments, along with an excess supply of plots, further contributing to persistent instability.
The government’s final determination regarding the tax package is expected to depend on achieving a balance between economic incentives and essential regulatory and fiscal factors.
Image Source: Shehbaz Sharif @ Instagram
