Golden Opportunity? Government Considers Abolishing Property Transfer Tax in Pakistan

In a strategic initiative poised to invigorate the real estate market, the federal government is preparing to eliminate the property transfer tax—specifically, the Federal Excise Duty (FED)—on the transfer of plots and commercial properties as part of the forthcoming Finance Act 2024. What is the rationale behind this? The tax has not been performing adequately, as evidenced by the low revenue collections during the first half of the fiscal year, which demonstrate its ineffectiveness.

Sources within the Federal Board of Revenue (FBR) suggest that the agency is poised to recommend the elimination of the property transfer tax on the allotment and transfer of both residential and commercial properties. This significant reform may be introduced in the upcoming Budget for the fiscal year 2025-26.

What Modifications Are Occurring?

Currently, developers and builders are required to collect property transfer tax at rates ranging from 3% to 7%, depending on whether the buyer is a tax filer or not. However, the absence of an adequate monitoring mechanism has turned the tax into a trivial formality rather than a viable source of revenue.

The current operational framework is as follows:

• 3% property transfer tax for purchasers who appear on the Active Taxpayers’ List (ATL).
• 5% property transfer tax for purchasers who have filed tax returns but are not on the ATL.
• 7% property transfer tax applies to individuals who have not taken the initiative to submit their filings.

The anticipated abolition of properties transfer tax may lead to a substantial reduction in the costs associated with real estate transactions, making property investment more appealing.

Is a Real Estate Surge on the Horizon?

The government is not limiting its actions to the abolition of property transfer tax. Discussions are also ongoing to cut transaction taxes on buying and selling immovable properties. The Taskforce on Housing Sector Development has presented several additional compelling recommendations, which include:

✅ Abolishing Capital Value Tax (CVT) in the capital
✅ Standardizing stamp duties throughout provinces
✅ Granting tax exemptions up to PKR 50 million for real estate investments

Should these policy updates become law, both investors and prospective purchasers may experience significant tax savings, allowing for greater opportunities in property investment.

Implications for Investors

For investors, the indications are clear: the real estate sector is becoming significantly more lucrative. With diminished properties transfer tax, reduced transaction costs, and lower tax liabilities, the sector is emerging as one of the most profitable investment opportunities in Pakistan.

The question is no longer “Should you invest?”, but rather, “How soon should you act before the market surge?”.

Are you prepared to seize this opportunity in the booming real estate sector? This could be the perfect moment to take decisive action before property prices rise!