Government and market sources said that Prime Minister Shehbaz Sharif this week approved the final recommendations on the real estate package, some of which may be implemented before the budget.
According to government officials, the matter will be taken up with the International Monetary Fund (IMF) for approval after internal preparations are completed. A follow-up meeting was also held on Friday after the prime minister’s indication in which the proposals were further refined.
Secretary, Ministry of Housing, Capt. (Retd) Muhammad Mahmood said that the prime minister has directed to review the possibilities of moderating taxes in the property sector and promoting investment by foreign Pakistanis. The Ministry of Housing is leading the project, the successful implementation of which will boost construction activities and balance the declining foreign investment in Pakistan.
Sources said that the government has proposed a self-declaration regime for foreign investors to attract their investment in Pakistan’s real estate market. In addition, the government has taken steps to set specific targets for loans, provide facilities to housing finance companies and non-banking institutions and reduce interest rates to 5 percent.
The government also plans to reduce the current withholding tax on the purchase and sale of property. According to sources, the tax rate on the sale of plots is proposed to be reduced from 4.5 percent to 1.5 percent, while the tax on purchase is being considered to be reduced from 1.5 percent to 0.25 percent. The prime minister had expressed his desire to abolish the 1 percent deemed income tax on property, which is facing a constitutional challenge in the courts.
Moreover, the government is also considering a proposal to abolish transaction tax on the first purchase of a property by the first owner and to reduce the tax burden by not considering housing loan installments as part of income.
According to a statement issued by the Prime Minister’s Office, Shehbaz Sharif was informed that special measures are being taken to promote investment by foreign investors and overseas Pakistanis, so as to increase housing projects, boost economic activity and create job opportunities in the sector.
The Prime Minister said that provision of housing loans is a “top priority” for the government and protection of foreign investment will be ensured. He added that investment in the construction sector will not only boost the economy but also create millions of jobs.
According to sources, legal reforms such as the National Housing Policy, the Condominium Law and the Foreclosure Law are also in the final stages, and the government will ensure their implementation as soon as possible.
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