Property Tax Updated – Islamabad: In a significant move to stimulate the country’s real estate sector, the Government of Pakistan has officially decided to abolish the 3% Federal Excise Duty (FED) previously imposed on the first sale of residential and commercial properties. This tax, introduced in mid-2024, had faced strong opposition from both property developers and real estate investors for its negative impact on market growth.
The decision was finalized following consultations with the International Monetary Fund (IMF) as part of Pakistan’s ongoing economic stabilization efforts. According to senior officials at the Federal Board of Revenue (FBR), a formal summary has already been sent for legal processing, with full abolition expected after cabinet approval and legislative amendments.
A Welcome Relief for Real Estate Buyers and Sellers
The now-abolished FED was applied to all new property transfers post-June 2024, levying 3% tax for registered filers, 5% for non-filers, and even higher penalties for late filers. The tax was widely criticized for discouraging property transactions, especially in a market already burdened by high property prices, stamp duties, and withholding taxes.
SEE MORE: Updated Real Estate Taxes Fiscal Year 2024-2025 – Federal Board of Revenue
Industry analysts believe this tax relief will unlock fresh investment opportunities and restore market confidence, especially for overseas Pakistanis investing in real estate and first-time homebuyers who were hesitant due to rising transaction costs.
Pakistan Real Estate Market: A Turning Point
Pakistan’s property tax reforms are seen as a strategic step toward creating a more stable and transparent real estate ecosystem. Removing the 3% FED is likely to:
Encourage local and foreign direct investment in residential and commercial properties.
Strengthen property sales and transfers across major cities including Islamabad, Karachi, Lahore, and Gwadar.
Promote affordable housing by reducing upfront costs for first-time homebuyers.
Support the government’s goal of boosting the construction and housing sector as a key driver of economic growth.
Experts note that under Pakistan’s Constitution, immovable property is a provincial matter, and the imposition of federal duties on such transactions had caused legal uncertainty. The Prime Minister’s Task Force on Housing was instrumental in recommending the removal of the FED and additional property tax relief measures, aimed at promoting both domestic and international real estate investment in Pakistan.
What’s Next for Property Investors?
As Pakistan positions itself as a growing hub for real estate investment, the removal of the 3% FED will likely lead to increased property transactions, higher foreign investor confidence, and better market liquidity. The move also aligns with calls for more rationalized and investor-friendly property tax structures across provinces and the federal capital.
SEE MORE: Property Tax Burden Easing: KP’s Government Proposal
This reform is expected to accompany other recommended measures, including:
Revision of property valuations every three years to reflect market realities.
Tax exemptions for affordable housing schemes and first-time buyers.
Standardization of stamp duties across provinces to ensure a level playing field.
Conclusion:
The abolition of the 3% FED is a bold step toward creating a more dynamic, competitive, and investment-friendly real estate sector in Pakistan. As the country opens its doors to both local property buyers and global investors, this tax relief marks a new chapter of growth and opportunity in the evolving Pakistan real estate market.
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