As Pakistan prepares to announce its FY2025–26 (FY26) federal budget, the construction industry finds itself at a crossroads. From housing to infrastructure, this sector has long been a growth engine — employing millions, stimulating allied industries, and enabling urban development. But with rising inflation, volatile input costs, and policy uncertainty, the industry needs clear signals and sustained support from the budget.
As per KPrates assessment here are seven critical areas where the FY26 budget can boost the construction sector while contributing to long-term economic resilience:
🧱 1. A Fair, Transparent Tax Regime for Builders and Developers
Tax policies have often been unpredictable for construction and real estate. While the sector has benefitted from amnesty schemes in the past, its long-term growth depends on transparency and fair taxation.
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What’s needed?
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Implement a streamlined, predictable tax framework for real estate and construction.
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Broaden the tax net to include undocumented landowners and unregistered developers, instead of overburdening compliant firms.
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Offer incentives for builders who formalize labor and use environmentally sustainable practices.
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🛠️ 2. Public Sector Infrastructure Spending
Public sector development programs (PSDP) are a major driver of construction activity. Yet underfunding and delayed payments have stifled private contractors and investors.
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What’s needed?
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Allocate sufficient funds for large-scale housing, transport, and urban infrastructure projects.
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Ensure timely disbursement to contractors working on government-backed infrastructure.
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Prioritize PPP (Public-Private Partnership) models to involve the private construction sector in national development.
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🏗️ 3. Affordable Housing and Urban Planning
Pakistan faces a housing shortfall of over 10 million units. A coordinated approach to urban planning and affordable housing can unlock demand for construction, particularly in low-income segments.
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What’s needed?
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Revive incentives under Naya Pakistan Housing Program with a focus on affordability and access to credit.
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Provide tax breaks or subsidized financing for vertical construction and green buildings in urban areas.
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Support municipalities in updating zoning laws and land use regulations.
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🌾 4. Stable Input Costs and Local Manufacturing
Construction costs have skyrocketed due to volatile prices of cement, steel, and fuel. The industry needs stable supply chains and incentives to localize production.
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What’s needed?
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Reduce import duties on essential raw materials where local capacity is insufficient.
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Support domestic production of construction materials through tax incentives and energy subsidies.
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Curb speculation in the cement and steel markets through better market oversight.
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🌍 5. Climate-Resilient Construction
The construction industry must adapt to climate change, with a focus on energy efficiency, green materials, and disaster-resistant infrastructure.
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What’s needed?
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Introduce incentives for green buildings (e.g., LEED-certified designs, solar roofing, water recycling systems).
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Mandate climate-resilient standards in public housing and infrastructure projects.
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Invest in training for construction workers in climate-smart technologies.
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🌐 6. Attracting Diaspora Investment in Real Estate
Overseas Pakistanis remain a major source of real estate investment. The budget should create safer and more attractive channels for their capital.
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What’s needed?
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Launch diaspora-friendly investment products like real estate funds and digital land registries.
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Ensure transparency in land titles and dispute resolution mechanisms.
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Offer remittance-linked incentives for housing and construction ventures.
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📈 7. Construction-Friendly Financial and Regulatory Reforms
Access to finance remains a major bottleneck for small and medium construction enterprises.
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What’s needed?
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Expand credit guarantee schemes for contractors and developers.
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Simplify regulatory approvals and reduce red tape for project approvals.
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Encourage Islamic financing tools and REITs (Real Estate Investment Trusts) for project funding.
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🏘️ Conclusion: A Budget That Builds the Future
The FY26 budget must treat the construction industry not just as a sector, but as a national priority. It holds the key to job creation, urban resilience, and GDP growth. By combining fiscal prudence with strategic incentives, the government can unlock the full potential of Pakistan’s builders, developers, and allied industries.
At KPrates, we believe a strong construction sector lays the foundation for a stronger Pakistan.