ABAD urges major tax reforms to spur investment, stabilise property market

KARACHI: The Association of Builders and Developers (ABAD) has called for significant tax reforms in its proposals for the federal budget for FY2025-26, urging the government to reduce the tax rate on property purchases under Section 236K to 0.5 per cent to ease the financial burden on buyers and investors and enhance transaction transparency.

The proposals, which stress the need for tax reforms, investment promotion and greater transparency, were presented by ABAD Chairperson Muhammad Hassan Bakshi. He said that the aim is not only to support the construction sector but also to contribute to national economic stability.

Bakshi proposed the adoption of a 15-year long-term tax policy to restore investor confidence, arguing that frequent changes in tax legislation create uncertainty, which deters investment and harms the broader economy.

ABAD also called for the abolition of advance tax under Section 236C, and the capping of the tax rate under Section 236K at 0.5 per cent. According to the association, removing the advance tax would streamline and expedite property transfers.

Bakshi described the current rate under Section 236K as excessive, reiterating ABAD’s recommendation to cap it at 0.5 per cent. He also called for the repeal of Sections 7-E and 7-F. Under Section 7-E, a 1.0 per cent tax is levied on property ownership regardless of income generation -- a provision he termed unjust. For Section 7-F, he proposed replacing the existing complex regime with a simpler per-area tax model, akin to Sections 7-C and 7-D, to ensure ease and transparency.

Regarding capital gains tax, Bakshi said the existing framework lacks clarity. ABAD has recommended linking the tax to the property’s holding period to bring balance and predictability to the market.

The proposals also highlighted inefficiencies in the Federal Board of Revenue’s (FBR) refund approval process, which ABAD described as slow and opaque. Bakshi argued that eliminating the FBR’s approval requirement would provide immediate relief to the business community. He also pointed to inconsistencies in property valuation tables, which he said complicate transactions and distort fair pricing. Resolving these discrepancies, he noted, would help establish a more transparent and equitable tax system.

ABAD further recommended reducing the withholding tax rate, stating that a lower rate would increase transaction volumes and, in turn, boost government revenue.

In a bid to encourage remittances, the association proposed tax relief for overseas Pakistanis. Bakshi criticised the existing transfer tax on property purchases made in US dollars, calling it unjust. Removing this tax, he argued, would incentivise remittances and rebuild investor trust among the overseas Pakistani community.

“These proposals are not intended solely to benefit the construction industry,” Bakshi concluded. “If implemented seriously, they will help stabilise the broader economy, generate employment, and address the country’s housing shortage.”