ISLAMABAD: In a major policy shift aimed at stimulating the real estate sector, the government has announced significant reductions in withholding tax rates for property purchases while abolishing federal excise duty on commercial property transfers.
Under the revised tax framework, the withholding tax rate for property purchases has been lowered across multiple slabs. For the first slab, the tax rate has been reduced from 4% to 2.5%. In the second slab, it has been cut from 3.5% to 2%, while in the third slab, the rate has dropped from 3% to 1.5%. This move is expected to ease transaction costs and encourage investment in the real estate sector.
Additionally, the government has decided to abolish the 7% federal excise duty that was imposed on the transfer of commercial properties, plots, and houses in the previous budget. This step is anticipated to lower overall costs for businesses and individuals looking to invest in commercial real estate.
To support housing affordability, a new tax credit has been introduced for residential units, including houses up to 10 marlas and flats up to 2,000 square feet. The tax relief is part of broader efforts to make homeownership more accessible, particularly for middle-income buyers.
Further measures include a policy push to promote mortgage financing, signaling the government’s intent to enhance financial accessibility for prospective homeowners. This strategy is expected to facilitate home purchases by allowing greater access to structured loans.
Moreover, in an effort to streamline property transactions in Islamabad, the government has slashed stamp paper duty from 4% to 1% on real estate purchases, significantly reducing upfront costs for buyers.
Officials have expressed confidence that these tax reforms will invigorate the real estate sector, enhance liquidity in property markets, and provide much-needed relief to homebuyers and investors alike.