Real estate taxes in Pakistan have become a major concern for investors and developers. On 6 March 2026, prominent Pakistani businessman and Patron-in-Chief of the United Business Group, Mr. S.M. Tanveer addressed a press conference highlighting critical challenges being faced by Pakistan’s real estate and construction sectors.
During his address, he emphasized that complex tax policies, high transaction costs, and restrictive regulations have slowed property investment and construction activity across the country. At the same time, he warned that billions of dollars are leaving Pakistan every year as investors shift their capital to international property markets.
However, he also shared a clear roadmap for reviving the sector through targeted reforms in taxation, housing policy, and mortgage financing.
This article explores the major points raised during the press conference and explains how real estate reforms could reshape Pakistan’s economic future.
Pakistan Faces a Housing Shortage of 12 Million Homes
Pakistan’s housing sector continues to face a massive supply gap. According to estimates referenced during the conference and supported by reports from the World Bank, the country currently faces a shortage of approximately 12 million housing units.
Several factors have contributed to this crisis:
- Rapid population growth
- Increasing urban migration
- Limited mortgage financing options
- High taxation on property transactions
As cities such as Lahore, Karachi, and Islamabad continue to expand, the demand for affordable housing keeps rising.
Therefore, expanding residential construction has become both an economic necessity and a social priority.
Real Estate Construction Once Supported Millions of Jobs
Mr. S.M. Tanveer explained that Pakistan’s housing sector previously played a major role in employment generation.
In earlier years:
- Around 200,000 houses were built annually by small independent builders.
- Each house construction created employment for approximately 25 workers.
These workers included:
- Masons
- Electricians
- Plumbers
- Carpenters
- Steel fixers
- Construction labourers
When these numbers are calculated collectively:
200,000 houses × 25 workers = nearly 5 million jobs
However, as construction slowed down due to policy changes and taxation issues, millions of workers gradually lost employment opportunities.
One of the biggest concerns raised during the press conference involved property taxation policies that significantly increased transaction costs.
Two major taxes affecting the real estate sector include:
Section 236K – Advance Tax on Property Purchases
Section 236K of the Income Tax Ordinance applies when a buyer purchases immovable property in Pakistan. The tax is collected at the time of property registration by the relevant authority and is treated as advance adjustable tax against the buyer’s annual income tax liability.
The applicable rate depends on the tax filer status of the buyer and the declared property value.
For Active Taxpayers (Filers):
- Property value up to PKR 50 million: 1.5%
- Property value PKR 50 million – PKR 100 million: 2%
- Property value above PKR 100 million: 2.5%
For Non-Filers:
- Property value up to PKR 50 million: 10.5%
- Property value PKR 50 million – PKR 100 million: 14.5%
- Property value above PKR 100 million: 18.5%
These rates significantly increase the upfront cost of acquiring property, especially for non-filers.
Section 236C – Tax on Property Sales
Section 236C of the Income Tax Ordinance 2001 imposes an adjustable advance income tax on the seller of immovable property in Pakistan. The tax is collected by the property registering authority at the time of registration, recording, or attestation of the property transfer.
Applicable Tax Rates
- Filers (Active Taxpayers List – ATL): 3% of the gross property value
- Non-Filers: 6% of the gross property value
This tax is treated as advance adjustable tax against the seller’s annual income tax liability.
As a result, many small builders stopped constructing homes because their margins disappeared.
Pakistan Is Losing Billions in Overseas Property Investment
Another major concern highlighted by Mr. S.M. Tanveer involves the flight of capital from Pakistan.
He estimated that approximately $10 billion from Pakistan flows into property investments in Dubai every year.
Many Pakistani investors prefer investing in international real estate markets such as Dubai due to:
- Lower transaction costs
- Simplified regulations
- Investor-friendly taxation policies
If Pakistan introduces competitive tax policies, a significant portion of this capital could return to the domestic real estate market.
Rising Bank Deposits Reflect Declining Investment Opportunities
An additional indicator of declining investment confidence is the rapid increase in bank deposits.
According to figures referenced during the press conference:
- January 2025: approximately PKR 30 trillion deposited in banks
- December 2025: approximately PKR 37 trillion deposited
Despite declining interest rates, investors continue to place funds in banks instead of investing in businesses or real estate.
This trend clearly indicates that profitable investment opportunities within the economy have decreased.
The Controversy Around Deemed Income Tax (Section 7E)
Another policy criticized during the conference is Section 7E, known as the Deemed Income Tax.
Under this rule:
- Authorities assume 5% rental income on property value
- Then apply 20% tax on that assumed income
For example:
If someone owns land worth PKR 10 million, the government assumes rental income even if the property generates no actual income.
As a result, many investors feel discouraged from holding undeveloped property or land intended for future construction.
Many real estate experts therefore recommend abolishing or significantly reforming this tax.
Proposed Real Estate Tax Reforms to Revive the Sector
Mr. S.M. Tanveer presented several recommendations aimed at revitalizing Pakistan’s housing and construction industry including:
Reduce Property Transaction Taxes
He proposed a simplified tax structure:
- 1% tax paid by the buyer
- 1% tax paid by the seller
- 1% stamp duty
- 1% municipal or local authority charges
This model would create approximately 4% total transaction cost, which aligns with international real estate practices.
Lower transaction costs would encourage property transactions and increase construction activity.
Remove Complex Taxpayer Categories
Currently, property taxes vary depending on whether a person is:
- Filer
- Non-filer
- Late filer
According to Tanveer, these complex classifications discourage investment and complicate property transactions.
Simplifying the tax structure would make real estate investment easier and more transparent.
Launch a National Housing Target of 500,000 Homes
Another major proposal involves constructing 500,000 homes annually.
This target could be achieved through:
- 200,000 homes built by individual builders
- 300,000 homes constructed by developers
A national housing construction program would significantly stimulate the economy.
Expand Mortgage Financing in Pakistan
Mortgage financing remains extremely limited in Pakistan compared to other countries.
Tanveer recommended increasing mortgage financing limits from: PKR 2.5 million → PKR 10 million
If 500,000 homes receive PKR 10 million mortgages, the economy would receive approximately: PKR 500 billion in investment
This equals roughly $2 billion, which could increase Pakistan’s GDP growth by nearly 2%.
Why the Real Estate Sector Is Critical for Economic Growth
Real estate plays a central role in economic development because it connects multiple industries.
When construction activity increases, the following sectors also benefit:
- Cement manufacturing
- Steel production
- Construction materials
- Electrical equipment
- Transportation and logistics
Therefore, strengthening Pakistan’s housing sector can generate widespread economic activity.
A Message to Pakistani Investors
During the press conference, Mr. S.M. Tanveer also urged Pakistani investors to consider investing within the country rather than transferring funds abroad.
He emphasized that Pakistan remains a country full of opportunities. With supportive government policies and improved taxation frameworks, the real estate sector could once again become a powerful driver of economic growth.
If these reforms are implemented effectively, Pakistan may accelerate its economic development and move closer to becoming a strong regional economy – often described as a future Asian Tiger.
Watch complete press conference of Mr. S.M. Tanveer below:
Conclusion
The 6 March 2026 press conference by Mr. S.M. Tanveer highlighted the urgent need for real estate policy reforms in Pakistan.
By reducing property taxes, simplifying regulations, expanding mortgage financing, and launching a national housing construction program, Pakistan could unlock enormous economic potential.
Reviving the real estate sector would not only address the country’s housing shortage but also generate millions of jobs, attract billions in investment, and strengthen Pakistan’s overall economic outlook.
Investors looking to benefit from Pakistan’s growing real estate market should carefully evaluate emerging opportunities in major cities such as Lahore and Islamabad. Projects with strong locations, structured payment plans, and rental potential continue to attract long-term investors.
According to market insights from CDB Properties, investors should prioritize projects with strong developer credibility, strategic location advantages, and clear rental potential to maximize long-term returns.
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