Government Abolishes 3% FED on Property Sales

The government of Pakistan has decided to abolish the 3% FED on property sales in the country, effective immediately for transactions after July. The government has recently decided to repeal the 3% Federal Excise Duty, which was introduced to harm the real estate industry ten months ago. The senior official of the Federal Board of Revenue (FBR) confirmed that officials from government leadership worked with International Monetary Fund (IMF) personnel to reach this agreement. An IMF special mission will arrive on May 14 to review Pakistan’s fiscal budget for the 2025–26 financial year.

Quick Overview of FED On Property Sale in Pakistan

Category	Details
IMF Involvement	A safety budget team from the International Monetary Fund plans to review the FY 2025–26 budget on May 14. IMF endorsement is required for abolishing the income tax surcharge and other tax relief measures.
Legislative Action on FED	FED on property sale to be abolished via amendments to the Federal Excise Duty Act. 3% FED on first sale for filers and 5% for non-filers applied to all properties post-June 30, 2024.
Legal and Constitutional Conflicts	The federal government faced legal challenges on property sales, as immovable property is a provincial subject. Many real estate authorities refused to collect the duty, causing negligible revenue collection.
Deemed Income and Capital Value Taxes	The Task Force proposed to abolish the deemed income tax through the repeal of the Capital Value Tax (CVT) in Islamabad.
Tax Rationalisation Proposals	Standardise stamp tax rates across provinces. Revise property valuations every 3 years. Reintroduce slab-based Capital Gains Tax (CGT). Transaction tax exemptions proposed for low-cost housing, government plots, and first-time homebuyers.
Construction Industry Relief	Suggestion to reduce input costs by rationalising taxes on construction materials.
Monetary Policy	A single-digit policy rate reduction recommendation is made. It received a denial from both the State Bank and the International Monetary Fund.
Real Estate Market Performance	The government collected Rs108 billion in withholding taxes in H1 FY24. It is Rs17 billion (18%) more than the same period last year.

Sources revealed that both the 3% FED for filers and the 5% for non-filers on property allotment or transfers will be eliminated. The FBR has introduced a summary procedure for initiating the legal abolition. Dr. Najeeb Memon, who represents FBR, announced that the FBR made this decision upon the recommendation from the Prime Minister’s Task Force on Housing. He confirmed that related legislation will be introduced soon. The FED on property sales is expected to be amended after approval from the federal cabinet, to finalise the process by April, subject to necessary legislative approvals. Due to jurisdictional issues and ongoing legal challenges, the FED collection from July to March of the current fiscal year remained negligible. Real estate authorities resisted its implementation as immovable property taxation falls under the provincial domain.

Real Estate Sector Crippled by Tax Burden

Introduced during the last federal budget, the duty applied to all first-sale commercial and residential properties:

3% for tax filers
5% for late filers
7% for non-filers

The levy was collected at the booking, allotment, or transfer stage and was not adjustable against other tax liabilities, further burdening the real estate market. Alongside the FED, several other taxes were introduced last year:

Category	Details
Farmhouse Tax	Rs. 500,000 on 2,000–4,000 sq. yard plots
	Rs. 1,000,000 on plots over 4,000 sq. yards (Islamabad only)
Residential Home Tax	Rs. 1,000,000 on homes sized 1,000–2,000 sq. yards
	Rs. 1,500,000 on homes over 2,000 sq. yards
Stamp Duty	Property value is 4% (Applicable in Islamabad)
Income Tax Surcharge	10% additional tax on individuals earning above Rs. 10 million annually

Potential Relief for the Salaried Class

According to sources, the government is also considering abolishing the 10% income tax surcharge starting in July and reviewing proposals to reduce tax rates for the salaried class, including increasing the taxable income threshold, pending approval from the International Monetary Fund (IMF).

IMF to Vet Budget in Mid-May

The IMF mission is expected to arrive in mid-May to review fiscal measures before the federal budget is presented to the National Assembly, likely around June 4 or 5, just before the Eid holidays. Finance Minister Muhammad Aurangzeb confirmed the timeline during a media briefing last Saturday. Real estate dealer Ahsan Malik expressed his support for the decision as a member of the Task Force on Housing, noting that the non-adjustable duty had acted as an impediment to investment. He emphasised that abolishing the FED on property sales will help revive the real estate market. Despite sluggish growth and heavy transaction costs, the government collected Rs108 billion in withholding taxes on property transactions in the first half of the current fiscal year, Rs17 billion higher than the previous year. The PM’s task force presented various essential recommendations:

Abolish the deemed income tax on properties.
There must be standardisation and rationalisation of stamp duty taxes between provinces and Islamabad.
Eliminate Capital Value Tax in Islamabad
Introduce uniform taxation policies through the National Tax Council
Reassess property valuations every 3 years
Offer transaction tax exemptions for Low-cost housing, Government plots, and First-time homebuyers.
Revert Capital Gains Tax to a slab-based system
Reduce construction costs by adjusting taxes on materials

Pakistan Stock Exchange (PSX) Sees Bearish Trend

The Pakistan Stock Exchange (PSX) registered a considerable market decline on Wednesday as its value plummeted 755.40 points to end at 116,020.11 points.

Key Trading Figures

Shares Traded: 481.8 million
Value: Rs 38.53 billion
Previous Day’s Value: Rs30.44 billion
Companies Traded: 451
- Gainers: 140
- Losers: 260
- Unchanged: 51

Top Traded Companies

Company	Shares Traded	Price per Share
Cnergyico PK	35,607,758	Rs8.51
Bank of Punjab Ltd.	25,483,545	Rs11.11
Fauji Foods Ltd.	25,268,499	Rs15.91

Major Movers

Category	Company	Change	Closing Price
Highest Gain	Unilever Pakistan Foods	+Rs273.35	Rs22,967.97
	PIA Holding Company Ltd.	+Rs148.85	Rs1,753.61
Biggest Loss	Hoechst Pakistan Ltd.	-Rs45.05	Rs3,194.95
	Philip Morris Pakistan Ltd.	-Rs43.60	Rs1,132.27

Global Tensions Impact Asian Markets

Asian stock market values fluctuated after Nvidia disclosed how new US licensing guidelines would limit Chinese access to its chips. News about US licensing rules triggering chip shipment limits to China sparked new worries about the ongoing trade dispute between the United States and China. China strongly rejected US tariffs, and subsequently, Hong Kong Postal Services stopped delivering packages to the United States. An export restriction on H2O chips stands as the newest disagreement between Washington and Beijing regarding technology, while highlighting how political tensions impact global market stability.

How Eastern Housing Lahore is the Best Option to Buy Residential and Commercial Plots?

The market position of Eastern Housing Lahore improved substantially after the government cut the 3% FED on real estate transactions and revitalised the real estate sector. Eastern Housing offers an ideal investment location, having received strategic planning through modern urban development approaches. The perfect growth conditions for Eastern Housing Lahore are fostered by improved investor confidence, combined with reduced transaction costs and rising demand resulting from more affordable prices.

The investment opportunities offer safety, combined with legal stability and advanced infrastructure, along with competitive prices supported by clear and transparent legal terms. Consequently, it establishes a protected platform for families to live alongside business opportunities. It is an exceptional option for investors seeking to capitalise on Pakistan’s recovering real estate market.

Conclusion

Abolishing the FED on property sales marks a crucial advancement in boosting Pakistan’s real estate market, as it removes excessive taxation burdens. The termination of the FED on property sales will trigger a revival of investor confidence, thus enabling more efficient real estate deal processing. The government chose to eliminate the FED on property sales as part of its effort to create a normalised tax system for the real estate market while making it sustainable in the long run.

The FED’s intervention in property sales acted as a significant obstacle to the real estate sector’s expansion in Pakistan. Still, its elimination now creates essential conditions for improved conditions in property investment markets. The government demonstrates its commitment to alleviating investors’ financial burdens by introducing new tax relief measures that reduce construction expenses and offer exemptions from the first-time homebuyer transaction fee. The elimination of FED on property sales brings positive news to both investors and the real estate industry, which enables advancement and stability throughout Pakistan’s real estate market.