LAHORE: The federal budget on Friday offered major tax relief to the real estate sector by halving withholding tax rates on property transactions for tax filers, a move stakeholders believe could revive market activity, improve documentation and restore investor confidence.

Under the new measures, withholding tax on property purchases by filers has been reduced from 2.5 per cent to 1.25pc, while the rate on property sales by filers has been slashed from 5.5pc to 2.75pc. The government says the reductions are aimed at lowering transaction costs and stimulating investment in the sector.

Property market players have welcomed the move, saying the tax cuts could help pull the sector out of its downturn while encouraging transactions to return to the formal economy.

“The higher taxation had created a double jeopardy for the sector,” said Malik Nadeem, a veteran real estate businessman in Lahore.

“Dealers and investors increasingly resorted to what they called ‘open business’ — transactions based on verbal commitments rather than proper documentation — to avoid the heavy tax burden. As a result, the government suffered on two counts: lower tax revenues and reduced economic activity.”

He said the sector had been pressing policymakers for relief for a long time and appeared to have finally succeeded. “We are still not sure about the extent of the impact, but apparently the measures should help increase government revenues, improve documentation and contribute to the revival of the sector,” he added.

Malik Maqsood, a property dealer operating in DHA Lahore, argued that perhaps the biggest gain would be psychological.

Published in Dawn, June 13th, 2026