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Business Recorder
12-05-2025
- Business
- Business Recorder
Eliminating FED alone won't revive Pakistan's real estate, says ABAD chairman
Withdrawal of the Federal Excise Duty (FED) on property transactions will not lead to substantial real estate activities as a reduction in the overall tax burden - currently up to 15% - is also necessary to boost the sector, according to Hassan Bakshi, chairman of the Association of Builders and Developers of Pakistan (ABAD). In an exclusive interview to Business Recorder, ABAD chairman welcomed the reports that the government plans to eliminate the FED on property transactions after Prime Minister Shehbaz Sharif approved a summary submitted to the federal cabinet. However, he urged the government to reduce what he called tax burden over the sector. 'There are various types of taxes applied during property transfers, totaling up to 15%, with the FED accounting for 3% to 7% of that,' Bakshi explained. 'When transferring a property, filers have to pay 13% to 15% in taxes, whereas non-filers have to pay between 35% to 40%.' Non-filer overseas Pakistanis should be allowed to purchase property at filer tax rates. Earlier in February this year, Finance Minister Muhammad Aurangzeb reiterated the government's commitment towards structural reforms, saying it would not support the 'plots and files' business, a speculative practice prevalent in Pakistan's real estate sector, calling it unsustainable. 'ABAD does not support file trading,' Bakshi clarified. Regarding a property package was to be offered by the government, Bakshi stated that no property package could be successful without a reduction in taxes. ABAD chairman also urged the government to ease tax policies for overseas Pakistanis who wish to invest in the country's real estate sector. 'Non-filer overseas Pakistanis should be allowed to purchase property at filer tax rates.' He proposed that once the property was purchased, the Federal Board of Revenue (FBR) could request their NTN (National Tax Number), and if they failed to provide it, they should be given a 15-day grace period to enter the system — or the system should automatically register them as filers. Commenting on the growing trend of Pakistanis investing in Dubai real estate, he noted that the surge was due to multiple factors, including: Fixed dollar-to-dirham parity Clear property titles where ownership is transparent and secure; A digitised system Rational exchange rates '[Moreover,] a flat 4% transfer tax in Dubai, regardless of whether the investor is a filer or non-filer. 'In the event of legal disputes, court cases are resolved quickly in Dubai and do not drag on for 20 years.' Bakshi stated that 10 million Pakistanis are employed abroad, and if the government facilitates them, it would create 'a positive impact on the real estate sector'. 'Real estate is an allied industry in which one sector is interconnected with another — if one sector grows, the others automatically gains momentum as well.' He further noted that currently the allied industries are operating at 30% to 50% capacity, and if their share reached 80%, the government could collect an additional Rs2 trillion in tax revenue. While discussing the allied industries, he expressed concern over the recent increase of Rs60 per 50kg bag in cement prices, despite a decline in inflation and interest rates. SBP reduces key interest rate by 100bps, takes it to 11% Bakshi also pointed out that the Pakistan Stock Exchange is associated with about 300,000 people, with a market capitalisation of Rs10 trillion, whereas the real estate sector involves one million individuals and has a market capitalisation of Rs90 trillion. 'First-time investors in real estate should be offered subsidised loans, and the installment of such loans should be equivalent to the rental income of the property being purchased. 'With government-led subsidised loans to home seekers, builders and developers can take care of the housing supply.' In response to another question about the growing trend of portions in Karachi, ABAD chairman said investments in different projects such as Malir Development Authority (MDA), Lyari Development Authority (LDA), and Taiser Town had been stuck for 25 to 30 years. 'The government has failed to hand over properties. As a result, people have been forced to seek alternative housing solutions. This is a failure of the government that couldn't transfer plots to rightful owners within the promised time.' ABAD chairman further noted that under the Benazir Income Support Programme (BISP), multiple sub-programmes are being run such as Benazir Kafalat Programme, Benazir Taleemi Wazaif (Educational Stipends), Benazir Undergraduate Scholarship Programme, and Benazir Nashonuma Programme. 'The government should reallocate a portion of Rs461 billion budget of the Benazir Kafalat Programme to launch a Benazir Housing Subsidy Programme, offering subsidised loans to people. 'If only 10% of the Kafalat Programme's budget is redirected, it will not place any extra financial burden on the government, and a number of people will be able to own a house.' He added that the Benazir Housing Programme could be exclusively for first-time home buyers. Meanwhile, Pakistan Real Estate Investment Forum (PREIF) president Shaban Elahi stated that in the upcoming budget for the financial year 2025-26, incentives should be provided to those investing in real estate, whether they are local investors or overseas Pakistanis. 'Real estate sector is the backbone of any economy, and if the government reduces taxes, investment in real estate will increase, which in turn will lead to higher tax revenues for the government,' Elahi said. The government should implement a friendly real estate investment policy that remains consistent for at least 5 to 10 years Regarding expected abolition of the FED, PREIF president made similar remarks that taxes on the real estate sector should also be reduced along with FED. 'Due to high tax rates in Pakistan, even local investors do not see profitability in real estate. Moreover, when investors do invest, they begin receiving various notices from the FBR, which creates an atmosphere of fear and discouragement,' he maintained. In contrast, he highlighted that in Dubai, local investors made substantial real estate investments over the past five years. Conduct of FBR officers visiting private premises closely monitored by civil agencies: Finance Division 'Overseas investment that previously flowed into Pakistan has significantly declined. The major reasons for this is the excessive taxation on real estate and the constant inquiries from the FBR.' Elahi urged the government to create an investor-friendly environment to boost both local and overseas investments in the real estate sector. 'The government should implement a friendly real estate investment policy that remains consistent for at least 5 to 10 years. This will help restore investor confidence.' He also suggested that Sections 236C and 236K (advance taxes) of the Income Tax Ordinance should be reduced to 1%. Lowering the rates under 236C and 236K would increase the volume of transactions, ultimately benefiting the government, enhancing real estate investment, and creating employment opportunities, he suggested. Real Estate Professional Forum Pakistan's president Abdul Sattar Sheikh proposed the immediate formation of a task force to 'revive the real estate activities', including experts from the ABAD other professionals from the sector. 'Instead of relying on instructions from international financial institutions, the government should take the initiative and fully support the real estate sector.' When asked about the upcoming fiscal year's budget, he expressed optimism, urging the government to act on the proposals presented by the ABAD chairman and other experts. Adeel Ahmed, a real estate professional, stated that slowdown in the real estate sector was not only due to excessive taxation. 'The system itself is not functioning properly,' he said. Ahmed mentioned that there are more than 60 industries connected to real estate, including cement, steel, tiles, sanitary ware, and others. 'If the government simply resumes development work in areas like Taiser Town and Hawke's Bay, which have been stalled for many years, it will restore public confidence and lead to a boost in the real estate business.' He highlighted that while there was much discussion around taxes on real estate, 'no one talks about the widespread bribery that occurs during property transfers'. Ahmed emphasised that abolishing the FED might bring some activity to the real estate sector, but real growth would only occur when corruption and bribery in property transactions were eliminated.
Express Tribune
10-02-2025
- Business
- Express Tribune
ABAD claims major tax reductions to boost property investment
Listen to article Mohsin Sheikhani, the Patron-in-Chief of the Association of Builders and Developers of Pakistan (ABAD), has stated that a new era for property investment is about to begin. He was asked if the government is planning to reduce taxes in order to boost investment in the sector. In a statement, Sheikhani said that the government would reduce the tax on property transactions and transfers for filers from 13% to 2-3%. He stated that other taxes, including Capital Value Tax, Capital Gains Tax, Federal Excise Duty, and Super Tax, would also be reduced or eliminated. Sheikhani claimed that no new taxes would be imposed on filers in the property sector. He added that the government was also working to resolve issues related to land encroachments, with Sindh IG being tasked with clearing land occupied illegally. 'ABAD has proposed affordable housing schemes to foreign investors at lower prices,' he said. He also mentioned plans to collaborate with the city government to transform a slum area in District South into a model project. Sheikhani further revealed that a delegation from ABAD would meet with the prime minister later this week to discuss further developments and strategic plans for the property sector.
