May 31, 2024

Federal Government to Support Real Estate Sector with Extended REIT Scheme Benefits


The Federal Government of Pakistan is taking significant steps to bolster the real estate sector by extending the benefits of the Real Estate Investment Trust (REIT) scheme for an additional three years. This extension aims to promote the documentation of real estate transactions and curb the influx of untaxed money into the market. At Makani Marketing, we understand the positive impact this move will have on the industry and are here to explain the details.

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Understanding the REIT Scheme Extension

The Real Estate Investment Trust (REIT) scheme has been a crucial component in promoting transparency and documentation in Pakistan’s real estate sector. Under the current regulations, Clause 99A of the Second Schedule of the Income Tax Ordinance (ITO) allows for profits and gains derived from the sale of immovable property or shares of Special Purpose Vehicles to any type of REIT scheme to be exempt from taxes. However, this provision was set to expire on June 30, 2023.

According to sources, the Federal Board of Revenue (FBR) plans to propose extending this benefit until June 2026. This extension will continue to support the documentation efforts and help minimize the use of untaxed money in real estate transactions.

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Benefits of the REIT Scheme Extension

  1. Enhanced Documentation: Extending the REIT scheme benefits will encourage more real estate transactions to be documented, reducing the prevalence of off-the-books deals and fostering a more transparent market.
  2. Increased Investor Confidence: By maintaining tax exemptions for REIT-related transactions, the government aims to boost investor confidence. A regulated and transparent market attracts more investors, leading to increased investment in the real estate sector.
  3. Promotion of Diverse Real Estate Investments: The extension will support the growth of various real estate sub-sectors, including agricultural and industrial warehousing, as well as the outsourcing of cellular towers. This diversification can lead to a more robust and resilient real estate market.
  4. Economic Growth: A well-documented and transparent real estate sector contributes to overall economic stability and growth. With more transactions being officially recorded, the government can better track economic activity and implement effective policies.

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Potential Impact on Real Estate Transactions

If the extension of Clause 99A is not implemented, it could discourage transactions involving REITs, undermining efforts to document the real estate sector. The continuation of the tax exemption is vital for sustaining the momentum gained in recent years and ensuring that the sector remains attractive to both local and foreign investors.



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