IMF raises objections to Pakistan govt's construction sector package

The International Monetary Fund (IMF) has raised objections to the construction package which the Pakistani government was scheduled to announce this month.

Sources in the Ministry of Finance informed Nukta that the package was termed as an amnesty instead of a relief package.

Prime Minister Shahbaz Sharif had constituted a task force to take steps to revive the construction and real estate sectors but the IMF's objection will force the committee to revamp the package, the sources said.

The government will prepare new terms of reference for the package and table them before the IMF team scheduled to arrive next month, the sources said.

Task force's recommendations

The task force recommended that instead of PKR 100 million, the new ceiling on waivers on wealth reconciliation for investments in the real estate and construction sectors should be PKR 50 million.

Moreover, it has proposed that the tax for filers on immovable property should be zero compared to 8% at present. Similarly, property federal excise duty of 3% on property purchases should be abolished.

Revitalization of construction sector generates employment and investment both locally and from overseas Pakistanis, the task force stated.

The task force further recommended that federal taxes under section 236C (tax on seller) should be reduced from 4% to 3% while those under section 236K (tax on buyer) should be reduced from 4% to 0.5% while the federal excise duty of 3% should be abolished.

Moreover, the stamp duty should be cut to 2%. Non-resident verification should be shifted to an online system via NADRA and there should be a uniform rate for filers and non-filers.

Housing finance rates should be brought down to single digit, and markup subsidies for low-cost housing, awareness campaigns and financial literacy programs to educate consumers should be launched, according to the task force,

Furthermore, the government should collaborate with real estate developers to offer mortgage financing options and implement fixed-term loans for five, 10, and 20-year periods.