June 2025 – Real Estate Taxes report

June 2025

Reading Time: 5 minutes

As the fiscal year heads for a close and the discussion on the next fiscal year’s budget is finalized, it would be prudent to take a look at the revenue collected by the Federal Bureau of Revenue (FBR) through property taxes.

For context, the government set massive tax revenue targets for the Fiscal Year 2024-25 (FY 24-25), expecting around Rs. 12.913 trillion in tax revenue, when the tax revenue collected by FBR for the previous fiscal year was Rs. 9.306 trillion. This was a massive jump of nearly 40% increase in tax revenue, which was unprecedented in the nation’s history. It also led to doubts about the government’s ability to achieve the target.

The government’s need for additional tax revenue was due to International Monetary Fund’s (IMF) current program, the Extended Fund Facility (EFF) agreed upon officially in July 2024 and approved by the IMF’s executive board in September 2024. This would be the country’s 24^th IMF program. In a bid to improve Pakistan’s finances, the IMF pressured the government to follow policies that increase its tax-to-GDP ratio.

Tax-to-GDP ratio is a metric that indicates the amount of tax revenue a government collects as a %age of its Gross Domestic Product (GDP, the total value of all final goods and services produced in the country in a time period, in this case annually). Tax-to-GDP ratio is seen as a measure of government revenue collection efficiency.

Pakistan’s tax-to-GDP ratio lags behind its peers, coming in at 8.77% for the Fiscal Year 2023-24 (FY 23-24). According to global economic development organizations, it should be close to 15%. For reference, other countries have varying tax-to-GDP ratios such as 12.6% for Malaysia, 9.9% for Sri Lanka, 17.7% for Thailand, 16.8% for Vietnam and 7.4% for Bangladesh in 2024.

In order to increase tax revenue, the government of Pakistan introduced a slew of measures targeting real estate. This included raising withholding tax (WHT) rates on property transactions, abolishing holding period for property transactions (more details here) and introducing the Federal Excise Duty (FED) for first time property buyers (more details here).

As a result of these measures, following is the report on revenue generated by these taxes for the FY 24-25 compared to the previous fiscal year:

FBR Tax Details	FY 2024-25	FY 2023-24
Total Revenue from WHT on property	Rs. 233.4 billion	Rs. 197 billion
Revenue from WHT on property sales	Rs. 115.8 billion	Rs. 92.8 billion
Revenue from WHT on property purchases	Rs. 117.6 billion	Rs. 104.1 billion
Revenue from FED	< Rs. 2 billion	–

This shows an increase of around 18.2% in tax revenue from WHT on property although FBR expectations were reported to be close to 50%. Furthermore, there was a slow down in the property market, with total transactions falling by around 15%. This happened despite a higher WTH tax rate which is summarized below:

WHT Tax Details	FY 2024-25	FY 2023-24
WHT on sale of property for filers	3%	2%
WHT on sale of property for non-filers	6%	4%
WHT on purchase of property for filers	3%	2%
WHT on purchase of property for non-filers	10.5%	7.5%