In what has been hailed as a game-changer that will reinvigorate the capital’s moribund housing market, the government has unveiled a wide-ranging package of tax cuts. The incentives are aimed at both buyers and builders, while also drawing investors to develop property and increase overall community confidence in the market.
As a local real estate reporter who has watched the ebb and flow of property in Islamabad for years, I can tell you this is one of the most investor-friendly policy changes we have seen in a while. The new tax regime encompasses drastic cut on with-holding tax, full discontinuation of FED, declared tax rebates for the housing sector and steep cut in stamp duty- if the deal is made within Islamabad.
Let’s take a closer look at each of these significant developments and what they might mean for the market:
These savings benefit buyers and sellers alike, particularly in the commercial and luxury residential property sectors. For example, a property which was subject to a tax of 4% on a transaction of PKR 20 million would have incurred an additional PKR 800,000 sum in withholding tax for the buyer. Now, on the new rate we save PKR 300,000 due to PKR 500,000.
This motivation too, may raise trading activity, as many who are put off by high transaction costs will otherwise be incentivized to risk entering the market.
It’s reduction in withholding tax in every slab that is the most immediate and meaningful reduction:
Another good news is the complete lifting of 7% FED on commercial properties, plots and houses. Commercial real estate was already under pressure from this tax, which added significantly to the cost of acquisition and to the amount of time that it took to put new sites into production.
This action also goes in the direction of the government’s larger plan of boosting business activities and development in built-up areas, including expanding corridors such as Gulberg Greens, DHA, Blue Area and Park View City.
So given that FED is no longer, we shall await to see :
This is a common-sense action to help homeowners everywhere, particularly middle-class families and first-time buyers, achieve their dream of being able to afford their first home.
Tax credits reduce a buyer’s tax liability — they are not subtracted from a buyer’s income as a deduction. This relief would mean that decision to invest in small family-sized property will become more affordable and attractive.
Islamabad’s peripheral neighbourhoods such as Bani Gala, G-13, Bahria Enclave, PWD, are already enjoying increased attention from the salaried class and this step will only boost it.
The announcement of a tax credit for:
This is likely to lead to a large percentage jump in property registrations that can help regularize countless real estate transactions thus, adding more transparency in real estate transactions.
For the first time ever, Capital city Islamabad’s stamp duty has been slashed from 4% up to 1%. This alone could change the entire local market; the capital not long ago found transactions slow to a trickle because of overwhelming documentation and fee costs.
Here’s what this means practically:
The government also pledged to support the real estate market by boosting mortgage financing in the long-term. Pakistan has one of the lowest mortgage-to-GDP ratios in the South Asia region, historically speaking. This shift signifies a pivot toward structured lending and lower income housing.
This policy has the potential to transform the manner in which real estate transactions are conducted in Islamabad (particularly in the case of low- to middle income groups) as the policy evolves.
Given the impetus for banks to provide affordable mortgage loans with friendly interest rates, there is a possibility for prospective buyers to be able to:
The inquiries have already shot up 20-30% in the last week in G-11, I-8, DHA Valley, Gulberg Residencia, and Top City-1, local agents and developers report. The tax reforms are introduced just at the right time as the capital’s market started to show lull because of:
With these new incentives, the stage is now set for:
The Islamabad real estate market has suffered from political destabilization, inflation, and investor doubt for too long. These new tax incentives represent a powerful, clear sign from the government, signalling that growth, transparency, and affordability are being encouraged.
So whether you are a first-time buyer who is looking for a family house, a developer who wish to build a new commercial plaza, or just want to invest your money in extremely high ROI, the time to act is now.
Lower taxes, better mortgage options and lower property rates have put Islamabad’s real estate market on a firm footing at last – which may only be the start of a new golden era.
