Budget 2026-27: Tax cut on construction materials may reduce house-building costs

ISLAMABAD: Building a house could become more affordable from the next fiscal year as the federal government has proposed a reduction in sales tax on construction materials in Budget 2026-27.

The move comes at a time when rising inflation and increasing construction costs have made home ownership difficult for many Pakistanis.

According to budget proposals, the government has reduced the sales tax on wholesale building materials from 2.5 percent to 1.25 percent. A similar reduction has also been proposed for retail building materials, with the tax rate being lowered from 2.5 percent to 1.25 percent.

Officials believe the proposed tax relief could help bring down the prices of construction materials and reduce the overall cost of building homes.

The construction sector has faced significant challenges in recent years due to rising prices of cement, steel, and other essential materials, resulting in higher housing costs across the country.

If approved, the revised tax rates will take effect from July 1, 2026, with the start of the new fiscal year.

Industry experts say the reduction in sales tax could provide relief to builders, contractors, and individuals planning to construct houses, although the actual impact will depend on how much of the tax benefit is passed on to consumers.

The proposal is part of the government’s broader efforts to support economic activity and ease the financial burden on citizens.