The IMF grants tax relief to first-time homebuyers in Pakistan. It will help low-income individuals and the Pakistani economy through the revival of the real estate industry. I will share the details of this tax relief and its subsequent impact on the Pakistani economy and property market. Explore the details in the blog.
Details of the IMF Grants Tax Relief to First-Time Homebuyers in Pakistan
The IMF has allowed the Federal Government of Pakistan to relax taxes on property buyers in the following categories:
Exemption of Federal Excise Duty (FED) for First-Time Property Buyers
The Federal Excise Duty (FED) has been waived (Withdrawal) for first-time property buyers in Pakistan.
Note: Before that, it was for all kinds of property transactions.
Explanation
Buying a property worth 10,00,000/- PKR as a first-time buyer will save you PKR 200,000/- taxes (2% FED Rate).
Why is This Relaxation?
It is for middle-class individuals and young professionals to invest in real estate and boost economic activity in the country.
Payment of Complete Taxes on the Subsequent Payments
You will pay the complete Federal Excise Duty (FED) and withholding taxes on purchasing the second property.
What Will be the Impact on Investors?
Property investors selling residential and commercial properties or buying more properties will pay high taxes.
Existing Property Sales Taxes Will Remain the Same
Capital Gain Tax
The property sellers will have to pay 5-15% tax based on the period they hold the property.
Property Withholding Tax
You will pay a 3-7 % property withholding tax. It will remain the same.
How does the IMF Grant Tax Relief to First-Time Homebuyers in Pakistan Help Real Estate?
The changes in property taxes after IMF approval will help to revive the real estate sector in Pakistan due to these factors:
For First-Time House Buyers
5M house will cost 100,000/- rupees less (for first-time home buyers). Therefore, it will increase the buying power and improve the real estate industry in the country.
Long-term Real Estate Investments
The investor will now prefer long-term real estate investments. He will avoid frequent selling and buying of properties due to higher taxes.
Growth in the Rental Market
Property owners will now prefer to put their properties on taxes instead of selling to save on property taxes. So, the rental market will boost the overall economy.
Economic Implications
According to Statista, the real estate market will reach US$2.08 TN in 2025. Therefore, the demand for property will create several jobs directly and indirectly.
What will not Change After this Tax Relief?
Despite the different changes in property taxes, the following taxes and regulations will remain the same:
Property Withholding Taxes
The property withholding tax will remain the same. For example, it will be 3% for fillers, 7% for non-fillers
Source: The FBR Circular No.12/2024
Capital Gain Tax
The capital gain tax will remain the same for the designated property holding period.
Conclusion
This IMF-approved tax relief will be a stepping stone for the Pakistani real estate market recovery. Additionally, it will help several middle-class individuals to buy their first home.
Frequently Asked Questions
Does the IMF grant tax relief to first-time homebuyers in Pakistan that applies to commercial properties?
No, this tax exemption is only for residential properties.
Are Overseas Pakistanis also eligible for this offer?
Yes, overseas Pakistanis who are first-time property buyers can avail of this offer.
Do these taxes apply to inherited properties?
No, these property taxes do not apply to inherited properties because they are not purchased.
