Real Estate Pakistan – Law, Mortgage and Taxation Explained

Time and again we have been witnessing people facing several issues regarding transfer and registration of property in Pakistan. We have even come across cases where the property has been stamped illegal but has been sold by the scammers.

Let us look into the four major legislation that governs the real estate sector of Pakistan:

  1. The Transfer of Property Act, 1882:

The transfer of property act of 1882 deals with authorization of individuals for property transfer, the procedure and along with the types of property which can be reassigned.

  1. Land Revenue Act, 1967:

The land revenue act of 1967, debates on the complete arrangement, and grading of the land and revenue division of Pakistan. It also addresses the diverse controls which are bestowed to the various land & revenue offices and their suitable jurisdictions.

  1. Stamp Act 1899:

Stamp Act of 1899, demands a certain amount to be paid by the buyers and sellers to the government as a substitute for the stamp papers being made to legalize agreements or contracts regarding real estate in Pakistan

  1. Registration Act 1908:

The registration act of 1908 is an act which forms the basics to audit the registration of all types of properties. It also has all the necessary strategies for maintaining property records. The registration act of 1908 has total 15 sections. In short this legislation is a complete guideline directing you on every single issues of real estate sector of Pakistan.

Types of Real Estate Mortgage in Pakistan:

  • Legal Mortgage

Legal Mortgage with subject to the static property is to be generated after the implementation of mortgage deed. The deed has to be stamped appropriately by the concerned registrar.

  • Equitable Mortgage:

In order to get the equitable mortgage for any property, the process is simple and only requires the deposition of original documents in the form of sale deed, or allotment letter. This type of mortgage does not require registration.

Pakistan’s Real Estate Taxation:

  • Taxation for Gains:

There is no legislation in the constitution that includes the taxation of real estate for gains; the income tax also lies with harmony on this with the constitution of Pakistan, and excludes the immovable property from the definition of capital asset, and is liable to tax.

  • Capital Value Tax on Transactions:

2 percent of the recorded value has been charged on the Finance Act of 2006 as a capital value tax, applicable on the residential property in urban areas having area of more than a Kanal, and with no land limit for the commercial property.

  • Real Estate Investment Trust:

Pakistan has recently established the Real Estate Investment Trust as an encouragement for real estate investors of Pakistan. Income of such trust is excused of all taxations, and around 90 percent of its profit of the year has to be distributed amongst the unit holders.