Housing scheme with SBP's help: Rs5bn set aside for mark-up subsidy
KARACHI: The federal government has allocated Rs 5 billion in the budget FY26 for a mark-up subsidy under a low-cost housing scheme, to be launched in collaboration with the State Bank of Pakistan (SBP) in the next fiscal year, aimed at enabling individuals to build homes through affordable credit.
The federal government has announced a number of incentives and positive measures for the construction sector and housing sector in the next fiscal year budget.
Previously, an affordable housing finance scheme titled 'Mera Pakistan Mera Ghar' was abruptly suspended in June 2022, by the federal government to cut the subsidy expenditures and since then, no new affordable housing initiative has been introduced.
Housing finance schemes: Pakistan govt ready to offer 100% guarantees to banks
Now, aimed to address the housing shortage in the country and support the housing and construction sector, Finance Minister Muhammad Aurangzeb has announced a new housing scheme in the upcoming budget. As per the budget proposals for FY26, a proportionate tax credit will be given on the profit paid on loans obtained for the construction or acquisition of a house measuring up to 250 square yards or a flat with an area of 2,000 square feet or less.
Accordingly, an amount of Rs 5 billion has been allocated in the budget FY26 for mark-up subsidy for low-cost housing. In addition, Rs 1 billion has been allocated as subsidy to Naya Pakistan Housing Authority (NPHA).
Experts have warmly welcomed the initiatives announced in the federal budget aimed at revitalizing the housing and construction sector, calling them timely, progressive, and essential for Pakistan's economic revival.
Dr Anosh Ahmed, a US-based real estate consultant has applauded the government for recognizing the sector's critical role in national economic growth, employment generation, and industrial development.
He noted that the construction industry serves as a backbone for numerous allied industries, including cement, steel, electrical equipment, and home furnishings. 'A strong construction sector leads to stronger industrial output and job creation across multiple value chains,' he said.
He particularly praised the government decision to reduce the rate of withholding tax on property purchases from 4 percent to 2.5 percent, from 3.5 percent to 2 percent, and from 3 percent to 1.5 percent. He emphasized that these reductions will ease the financial burden on investors, builders, and homebuyers, making real estate transactions more viable and attractive.
In addition, he welcomed the proposed abolition of the 7 percent Federal Excise Duty on the transfer of commercial properties, plots, and houses, calling it a decisive step toward removing structural barriers and encouraging real estate investment. 'The introduction of tax credits schemes would support middle-income families and encourage the development of low-cost housing schemes,' he added.
He further endorsed the government's plan to promote mortgage financing through a comprehensive system, supported by a dedicated policy from the State Bank of Pakistan.
Copyright Business Recorder, 2025
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