THE real estate sector has long been a pillar of Pakistan’s economy, driving investment, employment and development.
However, recent increases in government-imposed property transfer fees have significantly disrupted market activity.
Instead of generating higher revenues, these fees have discouraged buyers, sellers and investors, leading to a slowdown in transactions.
New charges, including stamp duty, capital value tax (CVT) and registration fees, have made property transactions prohibitively expensive.
What was once a manageable process is now burdened with high costs, discouraging potential investors.
The result is a decline in transactions, stagnating the market and affecting related industries like construction, interior design and real estate brokerage.
The government expected these fee hikes to increase revenue, but the strategy is proving counterproductive.
While per-transaction revenue has risen, the overall decline in transactions has offset any gains.
Many buyers and sellers are now resorting to informal, undocumented dealings to avoid excessive costs, reducing transparency and tax collection.
This shift to unofficial agreements poses legal risks, increasing the likelihood of property disputes and prolonged litigation.
The middle class, which relies on savings or bank financing to buy homes, is particularly affected by these increased costs.
Wealthy investors are also reconsidering their involvement in Pakistan’s real estate sector, redirecting their capital to other industries or foreign markets where transactions are more favorable.
This capital flight further weakens domestic economic activity.
Industry experts warn that if the government does not revise its fee structures, the long-term consequences could be severe.
The real estate market’s downturn is already impacting construction firms, suppliers and financial institutions reliant on mortgage lending.
A sluggish property sector can lead to a broader economic slowdown, as real estate is closely linked with multiple industries.
To address these challenges, policymakers must rethink their approach.
Instead of relying solely on higher fees, the government should explore alternative tax collection methods, such as improving documentation, cracking down on illegal land holdings and expanding the tax net to include unregistered properties.
A tiered taxation system could be a viable solution, where first-time buyers and lower-income households pay reduced fees, while luxury property transactions bear a slightly higher tax burden.
This would ensure continued investment without disproportionately affecting the middle class.
Encouraging investment rather than deterring it should be the priority, as a thriving real estate market attracts both domestic and foreign investors, creating jobs and boosting economic growth.
Where once real estate offices were bustling with activity, many now struggle to find buyers willing to bear both property costs and excessive transfer fees.
Investors are moving their capital elsewhere, weakening the sector’s contribution to Pakistan’s economy.
The government must recognize that overburdening the real estate market with high fees will only stifle growth.
A more strategic, balanced approach—one that fosters investment while ensuring fair taxation—is essential.
By making transactions more financially viable, the government can stimulate market growth, ultimately increasing revenue through higher transaction volumes rather than inflated fees.
Rising property transfer fees are stifling Pakistan’s real estate market, discouraging investment, reducing transactions and threatening economic growth across related industries.
—The writer is former Regional Executive Inclusive Development at NBP, Mirpur AK. (aahmadofpaswal@yahoo.com)
