The real estate and construction sector remained the main focus of the government of Pakistan Tehreek-e-Insaf (PTI) in the FY21 budget, as it reduced taxes and allocated funds to boost construction and related industries in an attempt to revive economic growth and create employment opportunities.
However, the government kept complete silence about proposed changes to mobilize new investment in the Pakistan Stock Exchange (PSX), which is considered a barometer to gage the country’s economic performance.
The government is giving “relief in taxes on income from the sale of immovable property (real estate),” said Hammad Azhar, Federal Minister of Industry and Production, while unveiling the National Assembly budget Friday.
The income emanating from the immovable property will not be taxed if the buyer sells it after four years from the date of buy. “The overall tax exemption (duration) would be reduced from eight years to four years,” he said.
In addition, the amount of capital gains tax (CGT) on property transactions will be reduced every year by 25 percent.
The CGT is charged at a rate of 20 per cent if, in the first year from the date of purchase, the profit on sale is Rs20 million or more. If the income is below Rs20 million, the CGT limit is 15 per cent, it has been learnt.
The minister said, “The government will not ask the source of income spent on construction (by builders and developers). The fixed tax on sale by the builders and up to 90% reduction in taxes on the purchase of home by the low-income people will continue in FY21.”
Previously, the government introduced a comprehensive relief package for construction and allied industries by announcing massive tax incentives to create job opportunities for day-to-day wage earners and to reactivate 40-70 industries, such as construction materials, paints and wood.
However, President Shaban Elahi, of the Pakistan Real Estate Investment Forum, did not find the relief relevant for real estate and construction, believing it would not help revive economic activity.
He said, “If the government decides to revive economic activity by real estate and construction, then the buyers should be granted such relief.”
Overseas Pakistanis he said were the biggest investors in the real estate and construction sector.