Pakistan suggests wealth reconciliation and tax concessions for real estate investments

Pakistan’s Ministry of Housing & Works has recommended waiving wealth reconciliation for investments in the real estate and construction sectors of up to PKR 50 million.

The task force for the development of housing sector, led by Minister of Housing & Works, submitted its recommendations to the Prime Minister Shahbaz Sharif to exempt transaction taxes for categories including low-cost housing, government plots, and first-time homebuyers.

The taxation working group proposed reducing the total tax on sellers from the existing 11-14% to 4-4.5%.

Similarly, the revision of property valuations every three years to reflect market prices is also proposed.

The task force has also recommended the waiver of subsection 2A of 236C pertaining to the 7E declaration and approval by the Commissioner, providing basic exemptions for properties valued at up to PKR 10 million, shifting non-resident verification to an online system via NADRA, and establishing a uniform rate for filers and late filers to remove disparities.

They also proposed abolishing section 7E of the Income Tax Ordinance, standardizing and rationalizing stamp tax rates across provinces and ICT, abolishing CVT in Islamabad, and ensuring uniform taxation policies through the National Tax Council.

The task force has further recommended the revision of property valuations every three years to reflect market prices and the introduction of exemptions for transaction taxes for specific categories such as low-cost housing, government plots, and first-time homebuyers.

The short-term recommendations also included reducing the policy rate to a single digit, resuming the MPMG Scheme to restore developer confidence, reintroducing mark-up subsidies for low-cost housing loans, launching awareness campaigns and financial literacy programs to educate consumers.

Collaborating with real estate developers to offer mortgage financing options, and implementing low/fixed-term loans for periods like 5, 10, and 20 years is also advocated.

It also recommends online, time-bound building approvals; vertical growth policies via tax incentives, green initiatives, solarization; relaxed FAR/regulations; high-density zones for G+2/3 buildings; housing growth framework; zone compliance system replacing NOCs.

According to the report, housing for low- and middle-income groups is to be defined in monetary terms, ranging between PKR 50,000 to PKR 200,000, for targeted implementation.

An official of the FBR told Nukta the Pakistan government will seek approval from the International Monetary Fund (IMF) before implementing these proposals.