Ministry suggests tax cuts, easy loans to transform housing sector
MG News | February 01, 2025 at 05:54 PM GMT+05:00
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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