The Federal Board of Revenue (FBR) has announced plans to auction 527 kanals of land owned by Bahria Town in Tehsil Murree on March 5, 2026, aiming to recover Rs 26 billion in unpaid income taxes related to the tax years 2020 and 2022. This marks the second scheduled date for the auction, which was originally planned for February 16 but was postponed without explanation. The auction will be conducted at the Large Taxpayers Office in Islamabad. Although no official reserve price has been disclosed, market sources suggest it may range between Rs 1.5 billion and Rs 2 billion.
The auction is the result of a decade-long legal and accounting dispute centering on the method Bahria Town used to report income from plot sales. Bahria Town had applied the “Percentage of Completion” (POC) accounting method, which treats customer payments as advances, deferring recognition of taxable income until construction milestones are met. However, a landmark Supreme Court judgment in March 2025 (M/s Emaar DHA Islamabad v. CIR) rejected this approach for land developers, ruling that since developers do not build physical houses for plot buyers, they must adopt the accrual method. This requires recognizing income immediately upon sale, reclassifying previously deferred amounts as taxable revenue. This decision led to the present Rs 26 billion tax default by Bahria Town. It is important to note that this tax recovery action is distinct and unrelated to the earlier historic Rs 460 billion settlement involving Bahria Town’s land acquisition in Malir, Karachi.
The FBR has strengthened its enforcement powers in recent budgets, enabling it to seize and auction property from defaulters. Recently, the FBR auctioned Bahria Town’s corporate office on Park Road, Islamabad, for over Rs 2 billion as part of this crackdown. The upcoming Murree land auction is part of this broader effort and concerns a parcel of 527 kanals located at Mauza Kathar Sharqi on Angori Road. The FBR legally attached this property on September 22, 2025, despite ongoing disputes over adjacent lands related to environmental issues.
Further intensifying the recovery efforts, the FBR has taken physical control of Bahria Town Tower in Karachi, which contains 145 residential units and 42 offices. During a raid in October 2025, important documents relating to Bahria Town’s nationwide projects were confiscated from this location, signaling a thorough investigation and enforcement approach.
Sources indicate that potential bidders in the upcoming auction may be required to demonstrate sufficient net assets to qualify for participation. This follows precedent set during the Park Road auction when the buyer, owner of Azad TV, underwent financial scrutiny. Additionally, there are indications that the FBR may extend its investigation and recovery efforts to other Bahria Town properties, including the Mall of Islamabad.
The Mall of Islamabad project has attracted over Rs 30 billion in public investment through the sale of apartments and commercial shops. The FBR is reportedly considering measures to protect these public investments while also pursuing its tax recovery mandate. The auction and enforcement actions reflect a shift towards rigorous application of tax laws, backed by judicial clarity and enhanced administrative powers. The resolution of this long-standing dispute signals a strong message about tax compliance and accountability in Pakistan’s real estate sector.
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