The federal government is considering substantial tax relief for Pakistan’s real estate sector in the upcoming Budget 2026-27, with proposals aimed at reducing property transaction taxes for tax filers and revitalizing investment in the housing and construction industries.
According to sources, the proposed measures focus on lowering withholding taxes under Sections 236K and 236C of the Income Tax Ordinance, which apply to property purchases and sales.
Under the proposed framework, the withholding tax on property purchases by tax filers may be reduced from 1.5 percent to 0.25 percent. Similarly, the withholding tax on property sales could be slashed from 4.5 percent to 1.5 percent, significantly reducing transaction costs for buyers and sellers.
The government has reportedly shared its plans with the International Monetary Fund (IMF) as part of ongoing fiscal discussions ahead of the federal budget announcement.
Officials believe that lower taxes on property transactions will help revive activity in the real estate market, encourage greater documentation of transactions, stimulate construction-related investment, and create employment opportunities across multiple sectors of the economy.
Despite the proposed relief, non-filers are unlikely to benefit from any concessions. Sources indicate that the existing 10.5 percent tax rate on property transactions for non-filers is expected to remain unchanged as part of the government’s efforts to discourage undocumented economic activity and promote tax compliance.
Alongside the proposed property tax reforms, key budgetary figures for FY2026-27 have also emerged.
The total federal budget outlay is expected to reach Rs17.1 trillion, while the government is targeting economic growth of 4.1 percent and inflation of 8.4 percent during the next fiscal year.
The Federal Board of Revenue (FBR) is likely to receive a tax collection target of Rs15.267 trillion, reflecting the government’s continued focus on increasing revenue generation. Petroleum levy collections are projected at Rs1.727 trillion.
On the expenditure side, development spending is estimated at Rs1.1 trillion, debt servicing costs are projected at Rs7.824 trillion, and defence expenditure is expected to stand at Rs2.665 trillion.
The proposed budget strategy reflects the government’s attempt to balance economic growth initiatives, including tax incentives for the real estate sector, with fiscal consolidation objectives under its broader economic reform agenda.
