ISLAMABAD — Pakistan’s real estate and construction sectors are expecting major tax relief in the upcoming federal budget for fiscal year 2026-27, as the government considers proposals to reduce property-related taxes and revive investment activity.
The budget, expected to be presented on June 5, could bring significant changes for property buyers, sellers, investors, and overseas Pakistanis, according to industry representatives and media reports.
Government Signals Possible Relief in Real Estate Taxes
The real estate sector has been under pressure for several years due to higher taxes, rising costs, and a slowdown in property transactions. Industry stakeholders say the sector is directly linked with more than 80 other industries, including cement, steel, paint, glass, electrical fittings, tiles, transport, and construction services.
They argue that when real estate activity slows down, many connected businesses also suffer. For this reason, the sector is urging the government to reduce taxes in the upcoming budget to encourage buying, selling, and construction activity.
Prime Minister Shehbaz Sharif has also reportedly hinted at relief measures for the construction and real estate sectors during meetings with business representatives. These signals have increased expectations that the government may announce major policy changes in the new budget.
Key Tax Demands from the Sector
Real estate stakeholders are demanding reductions in withholding tax, capital gains tax, and rental income tax. They say the current tax structure has discouraged investment and reduced the number of property transactions.
Abolition of Section 7E
One of the sector’s main demands is the abolition of Section 7E of the Income Tax Ordinance. Section 7E imposes tax on deemed income from immovable property. In simple terms, it allows tax to be charged on an assumed income from property, even if the property owner has not actually earned rent from it.
Industry representatives say this discourages documented investors and creates an unfair burden on property owners. They have also called for property-buying and selling taxes to be reduced to 1%.
Business leader Kashif Chaudhry has said that Pakistan’s economy cannot fully recover without restoring activity in the real estate market. He argued that reducing taxes would increase transactions and ultimately help the government collect more revenue.
FBR Proposals Under Consideration
According to reports, the Federal Board of Revenue has prepared proposals to provide relief to the real estate sector. These proposals include reducing taxes on property purchases and sales, while also making investment easier for overseas Pakistanis and local investors.
Under one reported proposal, withholding tax on property purchases for tax filers could be reduced from 1.5 percent to 0.25 percent. Tax on property sales may also be reduced from 4.5 percent to 1.5 percent.
The government has also reportedly briefed the International Monetary Fund on these proposed tax reductions. This is important because Pakistan’s budget decisions are closely linked with IMF targets on revenue collection and fiscal discipline.
FPCCI Calls for Wider Reform
The Federation of Pakistan Chambers of Commerce and Industry has also supported tax relief for the real estate and construction sectors. FPCCI President Atif Ikram Sheikh has said that taxes imposed under Sections 236C and 236K are expected to be abolished.
He has also called for the removal of Section 7E, describing it as a long-standing demand of the business community.
The FPCCI has further proposed the creation of a Real Estate Regulatory Authority, known as RERA, in Pakistan. The chamber says such an authority would help regulate the sector, improve transparency, and protect investors.
In its shadow budget proposals, FPCCI has suggested reducing real estate taxes to a uniform 0.5 percent. The chamber believes this would encourage investment and help revive economic activity.
Experts Urge Balanced Policy
Tax experts and economists say the government should reduce taxes that discourage transactions, but they also warn that reforms must be carefully designed.
Experts Huzaima Bukhari, Dr. Ikramul Haq, and Abdul Rauf Shakoori have argued that Pakistan’s tax system needs broader reform. They say the country should reduce pressure on productive economic activity while improving taxation of idle and speculative assets.
Their view is that transaction taxes should be rationalized, but the government should also modernize land records, improve property valuation systems, and tax speculative urban land more effectively.
Other analysts have warned that Pakistan’s room for tax relief may be limited because of IMF conditions. If the government reduces taxes in one area, it may need to raise revenue from another area to meet fiscal targets.
Overseas Pakistanis Seen as Key Investors
The proposed relief is also being viewed as important for overseas Pakistanis. Industry representatives say lower taxes and simpler procedures could encourage Pakistanis living abroad to invest more in property and construction projects.
They believe this could bring more foreign exchange into the country through remittances and investment. For Pakistan, where remittances play an important role in supporting the economy, this could be a major benefit.
FPCCI Senior Vice President Saqib Fayyaz Magoon has also said that real estate can help attract more foreign exchange if investors are given confidence and clear rules.
Revenue Challenge for the Government
The government faces a difficult policy choice. On one hand, lower taxes may increase property transactions and revive economic activity. On the other hand, the government must also meet revenue targets and satisfy IMF conditions.
FBR data shows that withholding tax collection increased during the current fiscal year. However, higher taxes have also contributed to a decline in capital gains tax collection compared to the previous year. This shows that while higher rates may increase some tax collections, they can also reduce overall market activity.
Real estate stakeholders argue that lower rates could bring more people into the documented economy and increase tax collection through higher transaction volume.
Budget Could Mark Turning Point
The upcoming budget is being closely watched by builders, developers, property buyers, sellers, and overseas investors. If the government accepts key proposals, the real estate sector could receive one of its biggest relief packages in recent years.
However, experts say tax cuts alone will not be enough. They believe the government must also improve regulation, digitize land records, update property valuation systems, and discourage speculative investment in idle land.
For now, the sector is waiting for the June 5 budget announcement. The final decision will show whether the government is ready to make a major policy shift for real estate and construction, or whether fiscal pressure will limit the scale of relief.
References
Bukhari, H., Haq, I., & Shakoori, A. R. (2026, May 15). Budget 2026–27 & fiscal justice. Business Recorder. https://www.brecorder.com/news/40421212
Bukhari, H., Haq, I., & Shakoori, A. R. (2026). Budget FY27: Out of the box solutions. Business Recorder. https://www.brecorder.com/news/amp/40422269
Federation of Pakistan Chambers of Commerce and Industry (FPCCI). (n.d.). Section 7E of Income Tax Ordinance should be abolished: Atif Ikram Sheikh. FPCCI Official Website. https://fpcci.org.pk/section-7e-of-income-tax-ordinance-should-be-abolished-atif-ikram-sheikh/
Khan, Z. A. (2026, June 1). Real estate sector seeks major tax relief in the budget. SAMAA TV. https://www.samaa.tv/2087351329-real-estate-sector-seeks-major-tax-relief-in-budget
Khyber News. (2026, June 1). Pakistan Federal Budget 2026-27 analysis raises questions over inflation, taxes, and IMF influence. Khyber News. https://khybernews.tv/pakistan-federal-budget-2026-27-analysis-raises-questions-over-inflation-taxes-and-imf-influence/
Pakistan Observer. (2026, June 1). Budget 2026–27: Big relief expected for property buyers, sellers in Pakistan. Pakistan Observer. https://pakobserver.net/budget-2026-27-big-relief-expected-for-property-buyers-sellers-in-pakistan/
Pakistan Observer. (2026). FPCCI unveils Pakistan’s first shadow budget for 2026-27. Pakistan Observer. https://pakobserver.net/fpcci-unveils-paks-first-shadow-budget-for-2026-27/
Siddiqui, S. (2026, June 1). Major tax relief expected for real estate in Budget 26-27. Bloom Pakistan. https://bloompakistan.com/major-tax-relief-expected-for-real-estate-in-budget-26-27/
Talreja, S. (2025, June 11). In Pakistan targets passive incomes, foreign e-commerce in a push for a $50 billion tax haul. Arab News. https://www.arabnews.com/node/2604103/amp
TechJuice. (2026, June 1). Major property tax relief likely in Pakistan Budget 2026-27. TechJuice. https://www.techjuice.pk/major-property-tax-relief-likely-in-pakistan-budget-2026-27/
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