Govt Moves to Cut Property Taxes Despite IMF Objections

The federal government is considering major reductions in taxes on property purchases and sales as part of the FY2026-27 budget, in a move aimed at reviving Pakistan’s struggling real estate and construction sectors.

According to sources, the government has proposed reducing the withholding tax on the purchase of immovable property by filers from 1.5 percent to 0.25 percent. Similarly, the tax on the sale of immovable property by filers could be cut from 4.5 percent to 1.5 percent.

The proposed reductions would represent some of the largest tax cuts for the property sector in recent years and are intended to stimulate market activity, encourage investment, and support the broader construction industry.

However, the proposals are still under discussion with the International Monetary Fund (IMF), which is reportedly opposing the planned tax reductions due to concerns about their potential impact on government revenues.

Government officials argue that lower transaction taxes could help unlock activity in the property market, leading to higher transaction volumes and ultimately generating greater overall tax collections despite lower rates.

The real estate and construction sectors are considered important drivers of economic activity because of their links to dozens of industries, including cement, steel, ceramics, transportation, and financial services. Policymakers believe stronger activity in these sectors could also help create employment opportunities and attract fresh investment.

The proposals come as the government finalizes the FY2026-27 budget amid efforts to balance economic growth objectives with revenue targets agreed under the IMF program. The final decision on the tax cuts is expected to emerge after ongoing negotiations with the lender are concluded.