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Year 2022-23 Budget taxes and impact on real estate sector of Pakistan

Posted by Capt Shahnawaz on June 14, 2022

Finally, the much-awaited budget of Pakistan for the years 2022-23 is here, and as expected, there have been some major policy changes in the finance bill 2022-23 especially related to the real estate sector. If you are confused about how new taxation in the budget will impact the real estate sector, I will try to clarify most of them in this blog.

In order to understand the real impact of taxes in Budget 2022-23 on real estate, we will have to divide the real estate sector into 3 segments. The Government has done the same as well. This has especially been done to promote certain segments on real estate and discourage investments in other. While some policies impact all three segments, others do not and that is why we need this segmentation, as it will help us understand where to invest in the coming year.

  1. Plots and files sector where there is no construction on the land.
  2. Construction sector such as houses etc.
  3. Highrise apartments etc.

The Government of Pakistan, in budget 2022-23 has announced three major policies regarding taxation of these segments. Do not worry if you can’t understand them right now, as I will explain them one by one:

  1. The withholding tax has been revised for all three segments.
  2. Capital gain tax and its implication have been revised for all the above segments.
  3. Real estate assets will be taxed on a deemed rental income basis above 25 M.

Increase in withholding tax

Withholding tax is paid by the purchaser of the property before they transfer the plot in their name. This is the only common factor that will impact all the three real estate sectors similarly. In the Budget 2022-23 Government has increased the withholding tax to 2% for filers and 5% for non-filers from 1% and 2% for filers and non-filers previously.

This is a significant increase, especially for non-filers. This will significantly increase the cost of transfer of plots as under:

Let us assume that any property, may it be a plot, house, or flat in Pakistan has an FBR value of 1 crore then the change in the withholding tax will be as under:

As per previous rates :

Filer would pay: 1 Lacs as tax

Non-filer would pay: 2 Lacs in tax.

As per revised rates after 1st July 22:

Filer would pay: 2 Lacs tax

Non-filer would pay: 5 Lacs tax.

Impact on real estate

In general increase in withholding tax means an increase in transfer costs and the real estate market looks at an increase in transfer costs as a negative factor for real estate.

However, in this case, I do not see this as a major reason to impact or trigger a real estate downtrend. This is a one-time cost and although it will discourage short-term trading, it will be acceptable to most investors.

Capital Gain tax and its implications

This is where tax policies are different for all the three segments of real estate that we described in the start of this blog. Let us first understand what CGT is, CGT stands for Capital gains tax, this tax is only applicable if you have made a profit on your real estate investment.

  • Plots/files: CGT will apply if you sell a plot before 6 years, and are exempted after 6th year.
    • 15% CGT where the holding period does not exceed 1 year.
    • 12.5% CGT where the holding period exceeds 1 year but does not exceed 2 years.
    • 10% CGT where the holding period exceeds 2 years but does not exceed 3 years.
    • 7.5% CGT where the holding period exceeds 3 years but does not exceed 4 years.
    • 5% CGT where the holding period exceeds 4 years but does not exceed 5 years.
    • 2.5% CGT where the holding period exceeds 5 years but does not exceed 6 years.
    • 0% CGT where the holding period exceeds 6 years.
  • House/built-up property: CGT will apply if you sell a house before 4 years, and are exempted after  4th year.
    • 15% CGT where the holding period does not exceed 1 year.
    • 10% CGT where the holding period exceeds 1 year but does not exceed 2 years.
    • 7.5% CGT where the holding period exceeds 2 years but does not exceed 3 years.
    • 5% CGT where the holding period exceeds 3 years but does not exceed 4 years.
    • 0% CGT where the holding period exceeds 4 years.
  • Apartment/highrise: 15% CGT will apply for the first year and 0% tax from 2nd year.
    • 15% CGT where the holding period does not exceed 1 year.
    • 7.5% CGT where the holding period exceeds 1 year but does not exceed 2 years.
    • 0% CGT where the holding period exceeds 2 years.

Impact on real estate of Pakistan

As you can see clearly that the focus of CGT is unproductive assets such as plots and files, whereas the impact on the construction or buildup property sector such as houses etc has hardly been revised, furthermore the apartment sector has been incentivized.

The FBR team openly stated that the reason to adopt this policy for CGT is to motivate people to invest in apartments and vertical growth and therefore we can safely assume that future policies of the Government will also be in a similar direction.

Deemed rental income on non-productive real estate

Now this one is a new name for wealth tax and the only real target for this tax is non-productive properties, such as plots and files. FBR has imposed a 1% Deem Tax as per the FBR value on the unused/additional property worth over 25 M. This includes unused houses, plots, farmhouses, or any land holding which has a value above 25 M but it doesn’t create regular income. The Government has deemed the income of such properties at 5% per annum, out of which 20% will be taxed, which comes out to be 1% of its FBR value.

The house you live in is exempted from this tax besides that 25 M worth of property is also exempt from it. Some of the important things you need to remember about this deemed rental income tax are as under:

  1. Your personal house is exempted from this tax.
  2. It will be levied on the collective FBR value of all your plots, for example, if you own 10 plots that have a collective FBR value of 100 M, the first 25 M will be exempt from tax and the remaining 75 M will be taxed at 1% of FBR value which amounts to 7.5 lacs per year.
  3. If you have a built-up property, house, commercial etc which is not being rented out, you will have to pay the deemed rental income tax on it.

The major target of this tax is the richest among us, who invest in dozens of plots that do not produce rental income and houses which they rent out etc but don’t declare their rental income.

In addition, this tax is also applicable in case a property is rented as under:

  1. If the tax under section 15 of the income tax ordinance is more than the tax under this section, then no further tax will be charged.
  2. If the tax under section 15 of the income tax ordinance is less than the tax under this section, then the difference of amounts will be paid under this section.

Impact on Pakistan real estate

The plots sector will get the biggest hit as they don’t produce any rental income and therefore will become a liability. The people who have amassed this kind of wealth can surely pay this amount of tax but future investment in non-rental producing properties will surely take a big hit.

While the smaller societies for the lower middle and middle class, may show some resilience and perform unaffected. The wealthier societies, such as DHA, and Bahria Town where investors have invested huge amounts, will tremble. And once the big boys fall, the impact will be felt on the smaller societies as well.

The focus is to discourage investors to hold more than 25M of unproductive assets such as plots, files, houses, farm houses, etc.


The present Pakistan budget for 2022-23 and its impact on real estate will be as under:

  1. It is very negative for plots, files, farmhouses, or any other unproductive real estate asset, so I am going to assume that if these policies remain unchanged, we will enter a downtrend in this segment.
  2. For built-up properties on the rental basis such as houses or commercials, it is a good budget as most things are unchanged and the continuation of policy is always good.
  3. The apartments sector has been highly incentivized with exemption from CGT after the second year and furthermore if rented out as built-up property, deemed rental income tax is also not applicable as long as you are paying tax under section 15 of income tax. This is the sector that will attract the most investment under these new policies.

Therefore, I believe the Government wants investors to shift real estate trading and investment towards apartments and highrises or towards actual businesses and industry.

You must also keep in mind that the DC values are expected to be revised as well by the provincial Government.

1 Step 1
Sixty6 Gulberg, first ever, RENTAL SMART building in the heart of Lahore


I have been warning against such a move by Govt to target unproductive assets such as plots and files etc since the second half of 2021. The real target is wealthy people as investors who only hold 25 M worth of properties as per FBR value, besides their homes are exempt from any taxes.

The present budget is clearly in accordance with the IMF and FATF plans to discourage investment in plots and files, which are considered as unproductive assets.

You now have three options if you want to make money in real estate.

  1. Move your investments to apartments/highrises.
  2. Invest in rental-producing properties.
  3. Wait for a miracle for the Government to back out from these policies.



Captain (Retd) Shahnawaz Yaqub Bhatti

Investment Consultant and CEO at Imlaak

Mob : +92 333 1616160 ( Whatsapp)

Mob : +92 300 2048048 ( Whatsapp)

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Ali Imam

If I buy a plot in Jul 2024 and construct a house on it and sell it in Dec 2025, how the CGT will be charged?

Will it be on the Capital Gain at plot’s price? or will construction cost be considered?

Mian Ahsan

Is there any difference in the Govt tax on DHA or outside property, in Lahore city?

They are increasing the tax from 1% to 2%, but DHA is already 2%, so it doesn’t make any difference to DHA?


Very informative and detailed article.

Can you please help on the following query.

I fully paid for a apartment in 2014. But the apartment project got delayed and it is expected to be completed in March 2023. I have the file for the apartment saying it is fully paid.

Will I have to pay the WHT tax once I register apartment in my name after I get possession? If I sell the apartment in March 2023 will I have to pay CGT?

Capt. Noman

Please advise if there is any CGT on built up house that was last sold in 2010 as per new rules? Thanks


is WHT on transfer is zero after 5 or 6 years or not ??? plz reply


very productive details


where is the notifcation how much gain tex in how many year s

Sami Ullah

Very realistic view from your side, as we can see the construction cost is extremely high these days. It is difficult to construct a house

rana hammad aslam

I don’t see any drastic change in property market in coming days some places unnecessarily rate increase in past one year against the fundamentals of property that areas will take dip but depending upon the holding capacity of stake holders if sellers sell at lower rate than prices will fall otherwise not very much
the reason for not affecting too much by these budgetary measures that the property is still safe model to invest in Pakistan for so many reasons as against the real businesses
secondly to park your investment in real estate is safe because the property is still under value in Pakistan and in the era of devaluation in currency the property market is the attractive place to save once money as against to hold it in currency
there are few opportunities for real business in short investment in Pakistan, therefore, all the resident and non resident Pakistani’s.
land/plots/houses still are attractive for investment with guaranteed 30% per annum Return on Investments


How much do you expect plot prices to fall for end user to build a house?

Tahir Iqbal

Very realistic review as usual. Thanks

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