Ministry suggests tax cuts, easy loans to transform housing sector

February 01, 2025 (MLN): To rejuvenate Pakistan’s struggling housing sector, the Ministry of Housing and Works has unveiled a comprehensive set of short, medium, and long-term recommendations through its Task Force for Development of the Housing Sector.

The proposed reforms focus on taxation relief, improved access to finance, urban planning enhancements, and a robust growth framework to accelerate development.

Short-Term Recommendations (Within 3 Months)

1. Taxation Working Group

• Reduction in federal transaction taxes
  • Section 236C (Tax on Seller) from 3% to 4% 1.5% to 2%
  • Section 236 K (Tax on Buyer) from 4% to 0.5%
• Abolishing the 3% Federal Excise Duty.
• Reducing stamp duty to 2%. (Provincial Tax)
• Providing basic exemptions for properties valued at up to PKR 10 million  
• Shifting non-resident verification to an online system via NADRA
• Uniform rate for filers and late filers to remove disparities

2. Access to Finance for Housing

• Reduction in Policy Rate to single digit
• Reintroducing markup subsidies for low-cost housing.
• Launching awareness campaigns and financial literacy programs to educate consumers.
• Collaborating with real estate developers to offer mortgage financing options
• Implementing fixed-term loans for periods like 5, 10, and 20 years.

3. Urban Planning & RERA

• Ensuring all building and housing scheme approvals are online and time bound
• Introducing policies for vertical growth through tax incentives, green building initiatives, and solarization.
• Relaxing building control regulations and floor area ratios (FAR) to facilitate vertical development
• Establishing High Density Zones for residential buildings with G plus 2 & 3 permissions

4. Growth Framework for Housing

• Digitizing approval processes to replace traditional NOCs.
• Defining affordable housing in monetary terms for targeted implementation
• Participation of private sector through PPP & joint Venture modes for low cost and affordable housing
• Permission to acquire 20% unacquired area in planned housing schemes against provision of low cost housing

Medium & Long-Term Recommendations (6 months to 2 Years)

1. Taxation Working Group

• Abolishing Section 7 E of the Income Tax Ordinance
• Standardizing and rationalizing stamp tax rates across provinces and ICT.
• Abolishing CVT in Islamabad and ensuring uniform taxation policies through the National Tax Council.
• Waiver of wealth reconciliation for investment in real estate and construction sector up to Rs. 50 million
• Revising property valuations every three years to reflect market prices
• Introducing exemptions for transaction tax for specific categories, such as low-cost housing, government plots, and first-time homebuyers

2. Access to Finance for Housing

• Strengthening foreclosure laws for property recovery and eviction.
• Developing digital mortgage platforms with blockchain-based solutions for transparency.
• Strengthening PMRC through budgetary support and collaboration with banks for subsidized credit facilities.
• Encouraging fintech companies to create innovative mortgage financing solutions.
• Implementing green mortgages and takaful-based housing insurance products
• Expanding the role of Microfinance Institutions (MFIs) in housing finance.
• Launching mortgage bonds for easy access to finance.

3. Urban Planning & RERA

• Developing master plans for major cities through provincial governments.
• Introducing urban regeneration policies supported by legislation for government and private lands.
• Establishing high-density zones and utilizing barren and arid lands for planned development.
• Promoting transit-oriented development (TOD) near transport terminals
• Ensuring strict enforcement to prevent irregular and illegal housing developments
• Revising zoning laws to promote vertical and high-density housing.
• Establishing RERA as per the RERA Act, followed by provincial RERAs.

4. Growth Framework for Housing

• Developing a National Housing Policy emphasizing low-cost and affordable housing as part of a national strategy.
• Legislating urban regeneration with pilot projects in Karachi and Islamabad.
• Resuming the MPMG Scheme to restore developer confidence.
• Leveraging modular construction, pre-fabrication, and green building materials
• Enhancing community engagement in housing development and management
• Ensuring policy continuity through parliamentary approvals.

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