Islamabad: The federal budget 2025-26 unveiled by Finance Minister Muhammad Aurangzeb on Tuesday introduced a series of significant reforms and tax relief measures aimed at stimulating Pakistan’s real estate and housing sectors. The proposals are expected to boost construction activity, promote mortgage financing, and simplify property transactions, marking a shift toward increased housing accessibility and formal sector growth.
One of the most notable relief measures is the reduction in withholding tax on property purchases. The government has proposed to cut the withholding tax rate to 2.5% from the existing rates of 3%, 3.5%, and 4% — a move likely to lower transaction costs for property buyers and investors.
In a further push to ease the burden on the construction and commercial property markets, the budget proposes to abolish the Federal Excise Duty (FED) of up to 7% on the transfer of commercial properties, plots, and houses. This abolition is expected to incentivise formal property transfers and bring more activity into the documented economy.
To boost mortgage financing, the government has announced the introduction of tax credits for buyers of houses up to 10 marlas or flats up to 2,000 sq. ft., particularly aimed at promoting low-cost housing. A comprehensive mortgage mechanism is also in the pipeline, signalling institutional support for long-term home financing.
In the Islamabad Capital Territory, stamp duty on property purchases has been slashed from 4% to 1%, a measure that could make property ownership more attainable in the federal capital.
Aurangzeb emphasized that these steps are part of a broader strategy to spur the housing sector, address the urban housing shortage, and enhance real estate’s contribution to the national economy.
Additionally, the government announced plans to end the distinction between filers and non-filers for major financial transactions. Moving forward, only individuals who submit wealth statements will be allowed to engage in such activities, including property deals — a significant policy aimed at improving tax compliance in the sector.
In a bid to curb unregistered activity, the government will also enforce strict penalties, including freezing of bank accounts, bans on property transfers, and even sealing of business premises for persistent non-compliance. However, affected individuals and businesses will retain the right to appeal within 30 days.
These proposals are part of the government’s wider plan to increase the tax-to-GDP ratio to 14% and bring more sectors into the formal economy, with the real estate market being a major focus.
Industry stakeholders are now closely watching how quickly these reforms will be implemented and whether they will translate into greater transparency, affordability, and investment in Pakistan’s property market.
Samra Zulfiqar, a real estate analyst at Zameen.com, is passionate about finding projects that offer buyers the best returns. Her keen insights spotlight the market’s most promising opportunities.
