ISLAMABAD: Pakistan’s real estate sector, a vital pillar of the national economy with deep linkages to employment, construction, and allied industries, has responded positively to the fiscal reforms announced in the federal budget 2025–26.
Industry experts believe the targeted tax reliefs and structural incentives—particularly for buyers—signal a shift towards market revival and documentation. However, policy disconnects at the local level, such as fee hikes by the Capital Development Authority (CDA), threaten to undercut the momentum and investor confidence.
While a section of Islamabad-based stakeholders prepares for protesting the CDA’s tripling of the property transfer fee, sector-wide sentiment remains largely focused on interpreting and adjusting to the broader tax and regulatory reforms introduced in the federal budget.
Pro-investment shift
The government, under Prime Minister Shehbaz Sharif, introduced a suite of fiscal measures aimed at reviving demand and facilitating formal growth in the real estate market. Key changes include:
- Advance Tax relief (Section 236K)
The advance withholding tax on property purchases has been significantly reduced for filers:- 1.5pc for transactions up to PKR 50 million
- 2pc for PKR 50–100 million
- 2.5pc for values exceeding PKR 100 million
This marks a reduction from earlier rates of 3–4pc and is aimed at making property purchases more accessible.
- Higher taxes for sellers (Section 236C)
In contrast, sellers—particularly those engaged in short-term gains—face increased tax burdens:- 4.5pc to 5.5pc for filers, scaled by transaction size
- Non-filers face rates as high as 11.5pc, reinforcing the state’s documentation drive
- Abolition of Federal Excise Duty (FED)
The complete elimination of FED, previously imposed at 3 per cent on real estate transactions, has been welcomed as a pro-growth move. - Reduction in stamp duty
Stamp duty in Islamabad Capital Territory has been slashed from 4 per cent to 1 per cent, further easing the transactional cost for buyers. - Tax credit on mortgaged housing
A notable incentive allows first-time homebuyers to claim a tax credit of up to 30 per cent if purchasing through bank financing. The move is aimed at boosting Pakistan’s underdeveloped mortgage market and promoting affordable housing.
Industry analysts note that this two-pronged approach—relieving buyers while increasing scrutiny on sellers and non-filers—indicates the government’s strategy to revive demand while expanding the tax net.
Shift towards formalisation
Experts have broadly welcomed the reforms, particularly the relief provided to genuine buyers and salaried individuals seeking home ownership. “This is a decisive shift toward formalisation of the property market,” said Ahsan Mehboob, a tax consultant and property law analyst. “The reduced transactional costs will spur genuine investment, but enforcement and inter-agency coordination will be key.”
However, there are growing concerns about inconsistent implementation and a lack of policy alignment between federal incentives and local authority practices.
CDA fee hike sparks “localised protest”
In Islamabad, discontent is brewing over the CDA’s recent decision to raise the property transfer fee from 1 per cent to 3 per cent—a move estate agents say directly contradicts the federal government’s relief agenda.
Sardar Tahir Mehmood, President of the Islamabad Estate Agents Association and a member of the Prime Minister’s Task Force on Real Estate, has termed the hike “a sabotage of pro-people reforms.” In a press conference this week, he warned of a protest lockdown outside CDA headquarters on July 22 if the decision is not reversed.
Realtors also allege that delays in the issuance of plot approvals and No Demand Certificates (NDCs) are fueling corruption and damaging investor sentiment.
Despite the strong language, observers see the Islamabad protest as a localised administrative dispute, not a reflection of national investor sentiment, which remains cautiously optimistic.
Real estate at a turning point
The real estate sector accounts for roughly two per cent of Pakistan’s GDP and supports over 40 allied industries, from cement and steel to design and logistics. Its health is seen as a bellwether for middle-class economic activity and long-term capital formation.
“This budget marks the first time in years where the government has shown a clear intent to support end-users over speculators,” said Dr Fariha Ali, an economist with the Urban Development Institute. “But without inter-governmental coordination, even good policies can fail in translation.”
With urban housing demand on the rise and overseas Pakistanis once again eyeing domestic investment opportunities, experts stress that continuity, transparency, and alignment between federal, provincial, and local authorities are crucial.
As Islamabad’s realtors take their grievances to the streets, the real question for the sector lies elsewhere: Can Pakistan finally build a real estate regime rooted in fairness, documentation, and sustainable growth?
