By: Junaid Qayyum Abbasi
As Pakistan prepares for Budget 2025–26 amidst severe financial pressures, tough IMF conditions, and sluggish economic activity, it is crucial for policymakers to look toward sectors with immediate potential for revival and sustainable growth. The real estate and Construction sector, often misunderstood and overlooked, stands out as a powerful engine that can help steer the economy toward recovery, provided it is enabled through rational policies, fair taxation, and effective regulation.
Real Estate: The Backbone of the Economy:
Contrary to the perception that real estate is a non-productive sector, it serves as the “Mother of Industries”. A single real estate transaction can activate over 70 allied industries — from cement, steel, and electrical to paint, woodwork, tiles, furniture, and more. Additionally, it creates employment for architects, engineers, contractors, lawyers, laborers, transporters, and sales professionals. The multiplier effect of this sector on economic activity, employment, and revenue generation is enormous.
A Safe Haven for Overseas Pakistani Investment
Real estate remains the most trusted investment channel for overseas Pakistanis, who contribute billions in remittances annually. Unfortunately, growing fears of excessive taxation, legal uncertainties, and fraudulent dealings have started to discourage foreign investment in this sector. Protecting this investment is essential for sustaining the country’s foreign exchange reserves and domestic capital flow.
Key Budget Proposals for 2025–26 By FORP.
1. Establish a National Real Estate Regulatory Authority
- Proposal: Register all real estate consultants under a centralized authority like RERA or the Pakistan Realtors Council.
- Impact: Brings transparency, professionalism, and consumer protection to the sector. Helps eliminate fraudulent agents and boosts investor confidence, especially for overseas Pakistanis.
2. Abolish the Deemed Rental Income Tax (Section 7E)
- This irrational tax has created panic among investors and halted trillions of rupees in potential investments. While its revenue contribution remains marginal, its economic damage is massive. It must be immediately abolished.
3. Remove Federal Excise Duty (FED) on Property Transactions
- Introduced in the previous budget, FED has significantly slowed down market activity. Its removal would reinvigorate the real estate sector.
4. Reduce Advance Income Tax on Property Sales & Purchases
- Current Situation: Under Sections 236K and 236C, both buyers and sellers are charged 3% advance income tax on declared value.
- Recommendation: Reduce this to 1% for filers to incentivize formal transactions and increase overall tax compliance and revenue.
5. Rationalize Property Valuation Tables
- In consultation with the Federation of Realtors Pakistan, revise property valuation tables once annually, reflecting real market values. In many areas, current government-assessed values are higher than actual market rates, discouraging investment.
6. Include Stakeholders in Policy Decisions
- Any new policy or taxation related to real estate should involve consultation with stakeholders, particularly the Federation of Realtors Pakistan, to ensure practical and fair regulations.
7. Crack Down on Illegal Housing Societies
- This would prevent tax evasion estimated at over PKR 500 billion and protect common citizens from fraudulent schemes.
8. Harmonize Property Transaction Costs Nationwide
- Standardize fees and taxes for property registration, transfer, and related services across all provinces and federal territories (including cantonment boards).
9. Continue Construction Amnesty and Control Material Prices
- Reinstating construction amnesty schemes and regulating prices of essential materials like cement, steel, and gravel can make housing more affordable for ordinary citizens and stimulate allied industries.
10. Establish Special Real Estate Tribunals
- Create fast-track tribunals under RERA to resolve property disputes within 90 days, rather than years-long litigation.
The Road to Economic Revival
A strong, regulated, and incentivized real estate sector can be a game-changer for Pakistan’s economy. It can create millions of jobs, attract foreign investment, generate substantial tax revenues, and stimulate over 70 connected industries. Budget 2025–26 presents a vital opportunity to unlock this potential. By implementing the above recommendations, the government can usher in a new era of economic activity, stability, and growth.
The writer is a freelance columnist
