Real Estate is one of the safest long-term investments because of the market stability and residential and commercial units’ demand. Even in Pakistan, investing in real estate is quite trendy. A seminar titled,  “Construction and Housing For Sustainable Development” was held in Dubai where Secretary Board of Investment (BOI) Fareena Mazhar discussed the opportunities and incentives for Pakistani developers and investors in real estate sector and also encouraged investors to explore the housing industry.

Below are the main highlights of the points discussed in the seminar.

The current government of Prime Minister Imran Khan focuses on economic reforms, policy changes, and incentives for different sectors for economic uplift. Due to this, local and foreign investors have made many investments in various sectors in recent years.

As announced by BOI Foreign Minister Fareena Mazhar, the current annual demand for housing units in Pakistan is around 700,000, and only half of this is being met. The shortage of residential units and commercial buildings in the country offers existing home builders, developers, and investors the opportunity to increase their investments to obtain higher returns, and new players to explore this sector and diversify their portfolios. The government encourages builders, developers, and real estate investors to propose new projects.

Numerous real estate investors participated in the seminar and were informed about the tax rebates for the construction industry in Pakistan such as

EXEMPTION FROM WITHHOLDING TAXES

An amendment in the Tax Ordinance that declares the construction industry of Pakistan as an industrial undertaking enables industry and enables industries to become eligible for benefits incentives and concessions which are available to other industries

The provisions of sections 150 and 153 of the Income Tax Ordinance shall not apply to builders and developers on the purchase of building materials except cement and steel.it also mentions that withholding tax is not applicable to services of plumbing, shuttering, electrification and other similar services.

The dividend income is also exempted of tax and withholding obligations, paid by developer company or provider out of profit.

TAX PAYABLE ON INCOME AND PROFITS

The Naya Pakistan Housing Scheme intorudec by federal government,  is developing affordable housing units across the country for anyone who can own a home. these housing units are being offered at subsidized rates through bank financing in simple monthly payments.

Builders and developers working on projects under the Naya Pakistan Housing and Development Authority (NAPHDA) or the Ehsaas programme are entitled to a drastic 90% reduction in taxes on their income and profits.

These projects are being developed on both state and private lands with different models in terms of the conditions specified by NAPHDA. However, the facilities and incentives for both projects remain the same which are;

  • NAPHDA will assist builders and developers in obtaining the necessary permits and authorization certificates (NOC).

  • The infrastructure will be built up to the project site and the rest will be developed by the construction company.

  • NAPHDA will help in coordination with the respective governments for the provision of basic needs that are necessary for the development of the project, such as electricity, road, water and sewerage systems.

  • NAPHDA will help negotiate with end buyers and bank mortgage facilities for the low-income segment. For projects on private land, the authority will arrange buyers and mortgages for 20% of the low-income group

  • A 90% tax rebate applies to low-cost home builders and developers

The infrastructure will be built up to the project site and the rest will be developed by the construction company.

NAPHDA will help in coordination with the respective governments for the provision of basic needs that are necessary for the development of the project, such as electricity, road, water and sewerage systems.

OPPORTUNITIES FOR INVESTORS AND DEVELOPERS

As the real estate industry has enormous potential and continues to thrive, the government has provided these facilities and incentives for real estate investors.

Some of the stable and potential real estate markets are Karachi, Lahore, Islamabad, Faisalabad, Multan and Rawalpindi, where people have the need and the power to invest in high-quality real estate developments.

Not everyone can afford to save huge sums of money on new investments. Fortunately, the State Bank of Pakistan has set mandatory targets for local banks to boost the country’s housing and construction industries. This initiative has given potential buyers the purchasing power they need to invest in and buy their own homes.