The federal government is considering major tax cuts on property purchases and sales in the FY2026-27 budget as it seeks to revive Pakistan’s struggling real estate and construction sectors.

According to sources, the government has proposed reducing the withholding tax on the purchase of immovable property by filers from 1.5 percent to 0.25 percent. The tax on the sale of immovable property by filers is also under consideration for a cut from 4.5 percent to 1.5 percent.

If approved, the proposed reductions would rank among the biggest tax cuts for the property sector in recent years and are aimed at stimulating market activity, encouraging investment, and supporting the broader construction industry.

However, the proposals are still being discussed with the International Monetary Fund, which is said to be resisting the planned reductions over concerns about their impact on government revenues.

Government officials believe lower transaction taxes could help unlock activity in the property market, increase transaction volumes, and ultimately raise overall tax collection despite lower rates.

The real estate and construction sectors are widely seen as major drivers of economic activity because of their linkages with a range of industries, including cement, steel, ceramics, transport, and financial services.

Policymakers are of the view that stronger activity in these sectors could also help generate employment and attract fresh investment.

The proposals come as the government finalises the FY2026-27 budget while trying to balance growth objectives with revenue targets agreed under the IMF programme.

A final decision on the proposed tax cuts is expected after the conclusion of ongoing talks with the IMF.