Rs5 billion allocated for low-cost housing mark-up subsidy in federal budget

The federal government has allocated Rs5 billion in the FY26 budget for a mark-up subsidy under a new low-cost housing scheme, to be launched in collaboration with the State Bank of Pakistan (SBP). 

As part of the FY26 budget proposals, the government will offer a proportionate tax credit on profits paid on loans taken for the construction or acquisition of houses measuring up to 250 square yards or flats with an area of 2,000 square feet or less. 

Additionally, Rs1 billion has been allocated as a subsidy for the Naya Pakistan Housing Authority (NPHA), which will help further support the sector.

The initiative aims to enable individuals to build homes through affordable credit. This move comes as part of a broader push to revitalize the housing and construction sectors in the next fiscal year.

The government had previously suspended the “Mera Pakistan Mera Ghar” affordable housing finance scheme in June 2022 to cut subsidy expenditures, leaving a gap in affordable housing initiatives. 

However, Finance Minister Muhammad Aurangzeb has now announced a new housing scheme in the upcoming budget aimed at addressing the country’s housing shortage.

Real estate experts praised the government’s recognition of the sector’s importance for national growth, employment, and industrial development. They also commended the government’s decision to reduce withholding tax on property purchases, cutting the rate from 4% to 2.5%, from 3.5% to 2%, and from 3% to 1.5%. This reduction will ease the financial burden on investors, builders, and homebuyers.