ISLAMABAD: In a major boost to the hotel and motel industry, the federal government has significantly reduced charges for enhancing covered areas of hotel plots to facilitate the timely completion of hotel projects.

The government expects that the rebate will help ensure the early completion of hotel projects ahead of next year’s SCO conference in Islamabad.

In June 2025, the Capital Development Authority (CDA) had increased Floor Area Ratio (FAR) charges from Rs930 per square foot to Rs6,300 per square foot. However, the federal cabinet, through circulation, approved a summary restoring the previous rate of Rs930 till the end of 2028.

Interestingly, in 2017 the enhanced FAR rate was Rs2,200 per square foot in Islamabad.

Federal cabinet restores Rs930 per square foot rate till 2028 to facilitate timely completion of projects ahead of SCO conference

However, the PTI government reduced it to Rs930 to boost the construction industry, and the present government has now agreed to retain the Rs930 rate till December 2028.

“This is a big relief for the hotel and motel industry. We should appreciate this step as it will help the industry flourish. However, there is also a need to reduce the property transfer fee to provide relief to small investors and the public,” said a source.

Last year, the CDA increased the property transfer fee threefold, putting the public and property dealers in difficulty, and several protest demonstrations were also carried out by real estate agents against the CDA, he added.

At least two cabinet members and sources in the CDA confirmed that the federal cabinet approved a summary a few days ago restoring the previous rate of Rs930. Large hotel plots measuring 10,000 square yards can avail a 1:8 FAR, while owners of plots measuring less than 10,000 square yards can construct buildings with a 1:6 FAR.

“Yes, we have approved the summary and subsequently a letter has been forwarded to the CDA for implementation,” said a cabinet source.

He said the summary was approved through circulation on February 16.

“Cabinet considered the summary dated February 6, 2026, submitted by the Interior and Narcotics Control Division, which was circulated for rebate/rationalisation of FAR charges for hotel plots in Islamabad, and approved the proposal at para 10 read with paras 8 and 9 of the summary,” read the cabinet decision seen by Dawn.

Sources said that last year, when the CDA increased the FAR rate, stakeholders from the hotel and hospitality sector submitted representations to the prime minister, expressing concerns.

“These included the long-term service-oriented nature of hotel operations (as opposed to sale-based commercial ventures), the capital-intensive nature of the industry with extended payback periods, the need to support Pakistan’s tourism and hospitality development, and the financial burden imposed by the revised FAR charges,” sources quoted from the summary presented before the cabinet.

Sources said that subsequently, the prime minister directed the CDA to examine the issue.

“In compliance with the direction received from the Prime Minister’s Office, the matter was submitted to the CDA board with a summary outlining that while the hotel and hospitality sector plays a significant role in strengthening tourism infrastructure, it is equally essential to maintain alignment with other commercial land uses to ensure revenue parity and preserve consistent urban planning standards across various FARs and development categories,” sources quoted from the summary.

Nonetheless, the CDA board proposed that the case be referred back to the federal government for a final decision on the representations submitted by stakeholders, he said.

Sources said the federal government subsequently formed a committee and the matter was taken up again by the CDA.

“Accordingly, the CDA conducted consultations with relevant stakeholders, who informed the board that the enhanced FAR charges notified in June 2025 had significantly escalated project costs, adversely affecting financial viability, construction schedules and timely operational readiness of hotel projects, particularly in the context of Islamabad’s obligation to host the SCO summit in 2027,” the summary stated.

It said the CDA “prepared and submitted a report containing stakeholders’ suggestions that, as a time-bound facilitation measure, pre-revision FAR charges may be allowed for hotel and motel plots for a limited and clearly defined period, strictly to facilitate timely completion and operationalisation of hotel projects.”

It was further suggested that appropriate safeguards, including bank guarantees or performance bonds, may be imposed in cases where projects are not completed within the stipulated timeframe.

The cabinet decision stated that the time-bound proposed revision of the FAR may be retained till the end of 2028.

Published in Dawn, February 23rd, 2026