Budget 2025-26: Real Estate, Reform, and Relief in the Spotlight

The federal government has just unveiled Pakistan’s Budget 2025–26, with Finance Minister Muhammad Aurangzeb outlining a PKR 17.57 trillion plan to steer the economy toward 4.2% growth. Under the watchful eye of the IMF, the budget takes bold steps to strengthen key sectors, widen the tax net, and give some much-needed relief to the salaried class.

Here’s a breakdown of the changes that matter most—especially if you’re involved in real estate, construction, or rely on a monthly paycheck.

Real Estate & Construction: Easier Buying, Lower Taxes

The government is betting big on real estate and construction to fuel economic recovery. If you’re looking to buy property or work in the construction industry, there’s good news:

• Withholding tax on property purchases has been slashed—now down to 2.5% or even 1.5%, depending on the property type (from the existing rates of 3%, 3.5%, and 4%). This reduces upfront costs for buyers.
• The 7% Federal Excise Duty (FED) on property transfers? Gone. This move makes it cheaper—and easier—to register property formally.
• Mortgage support is on the table: If you’re buying a house up to 10 marlas or a flat up to 2,000 sq. ft., you could get tax credits and mortgage assistance.
• Stamp duty in Islamabad drops from 4% to 1%, making homeownership more affordable in the capital.

These changes are designed to spark demand, bring more property transactions into the formal system, and boost activity across real estate-linked industries like cement, steel, and labor.

Construction: A Quiet Push Behind the Scenes

While real estate got most of the spotlight, the construction sector is also getting some behind-the-scenes support:

• No more FED on commercial property transfers, making it easier to invest in office spaces, malls, and mixed-use buildings.
• Tax incentives tied to mortgages could lead to more building projects, especially in affordable housing.
• Digital monitoring systems—including POS and AI tracking—will now monitor cement and other key inputs to reduce tax evasion.

The goal? Reduce construction costs, improve transparency, and encourage growth in a sector that’s been sluggish in recent years.

Filers vs. Non-Filers: The Heat Is On

If you’re not filing taxes, the window is closing fast.

• Non-filers will be locked out of big transactions—buying cars, property, opening bank accounts, or trading in the stock market.
• Withholding tax on cash withdrawals jumps to 1% for non-filers.
• Foreign travel could be restricted for those outside the tax net, though details are still being finalized.
• The government has already flagged 390,000 high-value non-filers and recovered over Rs 300 million using data analytics and audits.

In short: If you’re not part of the formal economy, you’re going to start feeling it.

Relief for the Salaried Class: Some Breathing Room

In a budget marked by tight spending, salaried individuals are finally seeing some relief:

• If you earn between Rs 600,000 and Rs 1.2 million per year, your tax drops from 5% to just 1%—a savings of up to Rs 24,000 annually.
• Those earning up to Rs 3.2 million also see trimmed rates, giving the middle class some room to breathe.
• The surcharge on high incomes (above Rs 10 million) has been cut by 1%—an effort to retain top talent and curb brain drain.

With inflation still hovering high, this relief aims to ease pressure on working households.

What’s the Bigger Picture?

This year’s budget seems to follow a clear game plan:

• Encourage documentation and widen the tax base.
• Revive real estate and construction, sectors with huge job-creation potential.
• Support the middle class, especially salaried workers, who often bear the brunt of inflation.
• Digitally enforce tax rules to catch evaders and recover lost revenue.

But it’s not all smooth sailing. While real estate developers and salaried professionals are optimistic, some economists caution that aggressive enforcement could stifle informal economic activity if not managed carefully.

Final Thoughts

Budget 2025-26 signals more than just fiscal planning—it represents a deliberate shift toward a better-documented, growth-driven economy. With bold steps taken to energize real estate and construction, enforce tax compliance, and ease the burden on salaried individuals, the government has laid a strong foundation for inclusive economic progress.

If implemented with consistency and political will, these reforms have the potential to reinvigorate investor confidence, boost job creation, and strengthen Pakistan’s economic resilience. The coming year holds the promise of not just recovery, but real transformation—one where formalisation leads to prosperity, and policy turns into progress.