UPDATE (Jan. 22, 2021): Construction projects worth Rs. 660 billion would start in Pakistan this year, according to the revelations made during the weekly meeting of the National Coordination Committee on Housing, Construction and Development (NCCHCD) on Jan. 21.
Prime Minister Imran Khan, who presided over the meeting was also briefed about the progress on different affordable and low-cost housing projects of the Ministry of Housing.
UPDATE (Jan. 18, 2021): The Security and Exchange Commission of Pakistan (SECP) saw a 32% increase in the registration of construction and real estate companies in 2020.
According to a recent report, the SECP registered 3,383 new real estate/construction companies in 2020, which was 32 percent higher than in 2019.
Overall, all sectors of Pakistan underwent a positive trend as 20,342 companies were registered last year, which was an increase of 24 percent compared to 2019 which saw the registration of 3,886 companies.
Prime Minister Imran Khan announced to restart the construction sector in Pakistan from April 14, 2020. A comprehensive relief package was announced detailing the various incentives the government has promised to give to the real estate sector. The step has been taken to boost construction activity in the country and to provide a livelihood to daily wage earners and labourers who have been badly affected by the coronavirus outbreak in the country. In this blog, we will discuss the various incentives for the construction industry and how it is going to benefit the real estate business in Pakistan.
Relief Package for the Construction Sector in Pakistan
The following points have been outlined in the relief package for the construction industry:
- Investors in the construction industry will not be asked to disclose sources of income
- Fixed taxation system for the construction sector in Pakistan
- For Naya Pakistan Housing Scheme investors will only have to pay 10% as tax.
- Withholding tax on construction materials will be exempted except for cement and steel
- There will be no capital gains tax for those who want to sell their property
- For Naya Pakistan Housing Scheme, a subsidy of PKR 30 billion has been announced
Let’s discuss these points in detail.
Investors in the construction industry will not be asked to disclose sources of income
Good news for investors! Anyone who wishes to invest in the construction sector in 2020 would not be questioned about their source of income and their money trail. Previously, when people wanted to buy a property they were asked to declare their income.
To encourage investors to buy property in the country, the government has given an incentive that no questions will be asked regarding the source of income for 2020. The immunity from declaring sources of income is especially given to builders and developers of various housing societies and projects. This however does not facilitate those who want to build their own houses.
The agriculture sector is already functioning and farmers have been employed so that there is no shortage of food in the country. However, the daily wage earners and labourers of the urban cities are unemployed. To provide livelihood to the labourers and daily wage earners, the construction sector in Pakistan will be opened from April 14.
Fixed taxation system for the construction sector in Pakistan
The major demand of the construction sector of Pakistan from the government was to fix the property tax rate. This package will also help to reduce the tax levied on the construction industry. Taxes will be levied according to per sq. yard of the area. This will significantly bring down the amount of tax investors used to pay on the property in Pakistan.
For Naya Pakistan Housing Scheme investors will only have to pay 10% as tax.
A major incentive was given to lure investors to start construction of houses in the Naya Pakistan Housing Scheme project.
Those working in the construction industry will be exempted from up to 90% of fixed tax, if they build houses for the Naya Pakistan Housing Scheme. This means that whoever constructs houses for Prime Minister’s low-cost housing scheme will only have to pay 10% property tax.
Withholding tax on construction materials will be exempted except for cement and steel
The main incentive to the construction industry is that the withholding tax, which is one of the different kinds of property taxes levied in Pakistan, will be exempted from the construction materials used in building houses, except for the formal sectors i.e. steel and cement, which will have to continue paying the withholding tax. Rest of the sectors will not be required to pay the withholding tax.
There will be no capital gains tax for those who want to sell their property
At the moment, the government charges about 5% to 20% Capital Gains Tax (CGT) when selling ready-to-move-in houses and developed plots.
But with the tax amnesty, families who want to sell their house during this crisis situation when the country is grappling with an epidemic, will not have to go through the hassle of paying the Capital Gains Tax. Apart from this incentive, the sales tax is also being reduced in collaboration with the provincial government.
For Naya Pakistan Housing Scheme, a subsidy of PKR 30 billion has been announced
In a bid to boost economic activities in Pakistan, especially in the construction industry and its allied sectors, the Prime Minister offered a PKR 30 billion subsidy to the Naya Pakistan Housing Scheme project.
The CEO of Blue World City Saad Nazeer has offered 5,000 built-up houses and 50,000 apartments for Naya Pakistan Housing Programme, free of cost.
So, these were some of the incentives offered by the government of Pakistan to boost the construction sector of Pakistan. You can also take a look at the various incentives by the government during COVID-19 pandemic.
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