The Task Force for the development of the housing sector in Islamabad has put forward significant recommendations aimed at revitalizing the real estate market. The proposed reforms include abolishing Section 7E of the Income Tax Ordinance and Capital Value Tax (CVT) in Islamabad, as well as reducing transaction taxes on buying and selling immovable properties.
Major Tax Reforms to Revive Real Estate Investments
According to industry sources, the Task Force has finalized a comprehensive set of short-term, medium-term, and long-term policy recommendations for the Prime Minister. The objective is to attract investment, counteract capital flight, and stimulate property transactions, which have suffered due to high tax rates.
Currently, transaction taxes range between 12-13%, discouraging investment and forcing capital to move abroad. Experts warn that if tax relief measures are not introduced, the real estate sector will continue to decline, impacting overall economic growth.
Current Market Challenges and Proposed Solutions
Recent policy changes have led to a significant slowdown in real estate transactions, dropping by over 50%. Many investors are now utilizing power of attorney to bypass heavy taxation, further reducing government revenue.
To counteract this decline, the Task Force’s key recommendations include:
- Abolishing the 7E declaration and commissioner approval for property transactions.
- Introducing exemptions for properties valued up to Rs 10 million.
- Transitioning non-resident verification to an online NADRA system.
- Implementing a uniform tax rate for filers and late filers.
- Revising property valuations every three years to align with market prices.
- Providing transaction tax exemptions for specific categories, such as low-cost housing, government plots, and first-time homebuyers.
Read More: FBR to Reevaluate High Taxes on Real Estate Transactions
Short-Term Measures for Immediate Impact
To provide instant relief to the real estate sector, the Task Force has suggested:
- Lowering the policy rate to a single digit to encourage home financing.
- Resuming the Mera Pakistan Mera Ghar (MPMG) Scheme for affordable housing.
- Reintroducing mark-up subsidies on loans for low-cost housing.
- Launching awareness campaigns to educate investors and buyers on tax reforms.
Long-Term Policy Recommendations for Sustainable Growth
- Digitizing building approvals and housing scheme registrations to eliminate bureaucratic delays.
- Incentivizing vertical development to optimize urban space.
- Defining low- and middle-income housing with clear monetary criteria for better-targeted government incentives.
- Ensuring federal and provincial coordination to implement uniform tax policies across Pakistan.
Why These Reforms Matter
Officials emphasize that streamlining tax regulations and reducing financial burdens on investors will drive economic growth, create employment opportunities, and attract foreign direct investment (FDI) into Pakistan’s real estate market.
If these proposed reforms are enacted, they could revitalize the property sector, making Islamabad an attractive destination for both local and international investors.
The proposed tax reductions and policy reforms present a golden opportunity for real estate investors. With streamlined procedures, lower transaction costs, and renewed investor confidence, Pakistan’s property market is poised for a strong recovery.
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