KARACHI: Pakistan’s complex property taxation system could make it less appealing for real estate investment compared to its regional neighbors, despite some specific advantages in individual tax categories.
According to the latest report, *Pakistan’s Real Estate Taxes & Trends*, issued by the House Building Finance Company (HBFC), the government’s FY25 budget introduces notable reforms aimed at boosting revenue, reducing speculation, and improving transparency in real estate taxation.
However, the report indicates that these new taxes have increased the overall tax burden, potentially reducing Pakistan’s competitiveness in the regional real estate market.
A comparative analysis with seven other countries — India, China, Singapore, Hong Kong, Bangladesh, UAE, and Malaysia — reveals significant differences in real estate tax structures. The report highlights that Pakistan’s two percent capital value tax (CVT) on property is unique in the region, as other major South and Southeast Asian countries do not impose a similar tax. This additional cost could potentially disadvantage Pakistan in attracting real estate investment.
The report also compares Pakistan’s capital gains tax (CGT), set at 15 percent for filers and 45 percent for non-filers, to regional standards. Pakistan’s rates are higher than those in Singapore and Hong Kong and more complex than China’s flat 20 percent rate. The UAE’s absence of federal CGT and Malaysia’s lower recent rate make them more attractive in this aspect.
Regarding stamp duty, Pakistan’s rates of 2 to 5 percent on property transactions are competitive but higher than China’s 0.05 percent and similar to the UAE’s rates. The additional CVT may increase the overall tax burden.
Lastly, Pakistan’s registration fees, ranging from 0.25 to 1 percent of property value, put it at a disadvantage compared to China and Singapore, where no registration fees apply.
Overall, the report suggests that while Pakistan’s real estate tax reforms aim to enhance revenue and transparency, they may inadvertently make the market less attractive compared to neighboring countries.
