The federal government is reportedly considering a major tax relief package for the real estate sector in the upcoming Budget 2026-27, aiming to stimulate property market activity, encourage investment, and support economic growth.
According to official sources, authorities are proposing significant reductions in withholding taxes imposed under Sections 236C and 236K of the Income Tax Ordinance. The measures are part of broader efforts to revive the construction and housing sectors, which are considered key drivers of employment and economic activity.
Under the proposal, the withholding tax on property purchases for tax filers could be reduced from 1.5 percent to 0.25 percent, while the tax on property sales may be lowered from 4.5 percent to 1.5 percent.
Sources said the government has also briefed the International Monetary Fund on the proposed tax reductions as discussions continue regarding fiscal reforms and revenue targets.
Officials believe that lowering transaction costs will attract more investment into the property market, improve liquidity, and increase the number of documented transactions. They argue that higher transaction volumes could ultimately compensate for lower tax rates by expanding the overall tax base.
However, the proposed relief is expected to apply only to tax filers. Non-filers are unlikely to receive any concessions, with their property transaction taxes expected to remain significantly higher. Reports suggest that non-filers may continue to face a tax burden of around 10.5 percent on property transactions.
The government’s strategy is aimed at reviving a sector that supports numerous industries, including construction, cement, steel, and housing development. Policymakers believe that reducing taxes for compliant taxpayers could help unlock stalled investments while encouraging greater documentation of economic activity.
The proposed measures are expected to be announced as part of the federal budget for FY2026-27, subject to final approval by the government.
