New budget eases tax burden on construction, housing

June 10, 2025 (MLN): In a bid to revitalize the construction sector, the federal government has proposed a substantial reduction in taxes affecting property transactions and housing finance in the Budget 2025–26.

The withholding tax on property purchases will be lowered from 4% to 2.5%, from 3.5% to 2%, and from 3% to 1.5%, depending on the transaction slab.

In a further step to ease financial pressure, the federal excise duty of up to 7% previously applied to the transfer of commercial properties, plots, and houses will be eliminated.

To promote affordable housing, a new tax credit will be introduced for homes up to ten marlas and flats up to 2000 square feet.

Alongside this, a structured mortgage financing system will be developed to enhance access to low-cost housing loans.

Additionally, stamp duty on property transactions in Islamabad will be reduced from 4% to 1% to address the growing housing shortage.

The federal government has also expressed hope that provincial administrations will complement this initiative by lowering their own taxes on real estate transfers.

These measures are expected to stimulate the housing sector and reinforce its contribution to economic growth.

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