Prime Minister Shehbaz Sharif has decided to delay a verdict on the proposed tax incentive scheme aimed at the real estate industry, emphasizing the importance of addressing significant issues before proceeding.
Sources indicate that the Federal Board of Revenue (FBR) has declined a suggestion to grant tax exemptions of up to Rs. 50 million for first-time purchasers of homes, shops, or offices. The FBR mentioned a limitation set by the International Monetary Fund (IMF) against such exemptions as the rationale behind this decision. FBR Chairman Rashid Langrial contended that the suggested relief would effectively amount to tax evasion, rendering it unacceptable according to IMF standards.
Conversations on Tax Reductions and Eliminating FED
In a gathering of the housing sector task force, officials examined the possibility of lowering property transaction taxes and abolishing the 3% federal excise duty (FED) on real estate dealings. While the FBR chairman advocated for the elimination of the FED, certain members of the task force voiced apprehensions that tax reductions could incite speculation within the real estate market.
The administration is additionally assessing the implementation of interest rate subsidies to enhance the affordability of mortgage loans for low- and middle-income purchasers, aiming to boost access to housing.
Pakistan’s real estate industry is predominantly unregulated, with agricultural land often transformed into housing societies without proper approvals. The market suffers from deceitful sales of plots and apartments, combined with an oversupply of plots, which further adds to continual instability.
The government’s ultimate decision regarding the tax package is anticipated to rely on achieving a balance between economic incentives and crucial regulatory and fiscal considerations.
Image Source: Shehbaz Sharif @ Instagram
