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The Pakistani government is considering a significant increase in the Capital Gains Tax (CGT) on real estate transactions, raising the rate from 15% to 35% in the 2025-26 fiscal budget.
This move aims to align property taxation with corporate tax rates and boost revenue collection. This decision is being considered after a virtual meeting between the IMF and the government over the fiscal budget. To integrate the IMF’s policies, the government targets a tax-to-GDP ratio of 11% for FY26, with real estate identified as a critical area for boosting tax collection.
Real Estate was one of the few sectors that kept the economy stable during its worst state in 2022-23. It was projected to cross the $2 trillion mark in 2025, but with the expected increase in CGT, surely there will be a retreat.
Sources clarify that the proposed CGT hike will not apply to income from stock market shares. This shows that it will directly target the masses, giving an edge to investors, raising potential questions. It could result in reduced demand and declining property prices due to increased withholding taxes, ultimately resulting in a setback to the real estate sector.
