The International Monetary Fund (IMF) has expressed serious concerns over Pakistan’s planned construction sector package, slated for announcement this month. Sources within the Ministry of Finance revealed that the package was initially presented as an “amnesty” rather than a genuine relief package, prompting the IMF to call for a comprehensive revision
In response, Prime Minister Shahbaz Sharif’s government has ordered a complete overhaul of the package. A dedicated task force, set up to revive the construction and real estate sectors, will now develop new terms of reference and present a revised proposal to an IMF team next month.
Task Force Recommendations
Key recommendations from the task force include:
- Waiver Ceiling: Lowering the maximum waiver on wealth reconciliation for investments in the real estate and construction sectors from PKR 100 million to PKR 50 million.
- Property Tax Adjustments: Eliminating the tax on immovable property for filers (currently 8%) and abolishing the 3% property federal excise duty on purchases.
- Federal Tax Reductions: Cutting the seller’s federal tax under section 236C from 4% to 3% and reducing the buyer’s tax under section 236K from 4% to 0.5%, while also eliminating the 3% federal excise duty.
- Stamp Duty: Reducing the stamp duty to 2%.
- Online Verification: Transitioning non-resident verification to an online system through NADRA, with a unified rate for both filers and non-filers.
- Housing Finance Improvements: Lowering housing finance rates to single digits, and introducing markup subsidies for low-cost housing. The task force also recommended launching awareness campaigns and financial literacy programs to educate consumers.
- Mortgage and Loan Options: Collaborating with real estate developers to offer attractive mortgage financing options and fixed-term loans with options of five, 10, and 20 years.
The task force stressed that revitalizing the construction sector is essential not only for stimulating local employment but also for attracting investments from overseas Pakistanis. However, the IMF’s objections underscore the need for a more balanced and sustainable policy framework that aligns with international fiscal standards.
As the government works to fine-tune the package, market watchers and industry stakeholders will be closely monitoring the revamped proposal, which is expected to play a crucial role in both stimulating economic growth and meeting the IMF’s stringent conditions.