The recently announced 2015-16 Federal Budget brings positive signs for the real estate sector of Pakistan. With relief measures for developers and builders as well as reduction in taxes for people engaging in real estate investment trusts (REITs), it has given a boost to this multi-billion dollar industry.

The construction sector creates a positive ripple effect on 16 other industries of Pakistan and the government has taken certain measures to provide incentive packages for it. Firstly, the markup on housing loans obtained by individuals for construction or buying of a house can now be deducted up to 50 percent of the taxable income.

Secondly, the minimum tax has been suspended on builders for construction and sale of residential buildings. The supply of bricks and crushed stone will also be exempted from sales tax for up to three years till 30th June 2018. The customs duty on the import of construction machinery has also been reduced to ten percent.

Lastly, the government has also taken measures to promote the development of REITs in Pakistan. The capital gains of any person who sells a property to a REIT development scheme will be exempted from Income Tax till 30th June 2018. Similarly, if a REIT scheme for the development of housing sector is set up by 30th June 2018, the rate of income tax chargeable on dividend income will be reduced by 50 percent for the first three years.

Saad Arshed, Country Director of Lamudi Pakistan, said: “The relief measures provided by the government will indeed have a positive impact on the real estate industry of Pakistan. All these reduction in taxes and import duties will definitely give a boost to the housing and construction sector of Pakistan and help in mitigating its housing backlog.

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With the reduction in petroleum prices since last year there was a reduction in transportation costs of housing materials for construction. With these further deductions in taxes, it will further reduce the housing construction costs and will overall have a positive impact on the real estate industry.”

The government has taken positive measures to revive the real estate activity of Pakistan. The builders and construction industry will benefit manifolds by all these incentive measures introduced. All this will create more employment opportunities in this sector and have a positive impact on its further 16 allied industries too.

 

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