Business News of Thursday, 15 January 2015
Proceeds from a newly introduced VAT on real estate should be reinvested in Ghana’s property sector, including to subsidize affordable housing, according to some stakeholders in the industry.
Finance Minister, Seth Tekper, announced the real estate tax in his 2015 budget statement. The tax is set to be pegged at five percent. The announcement was greeted with mixed reactions from stakeholders in the industry, with some stating that it could stunt market growth of the real estate sector while others believe the VAT rate is justifiable.
Real estate broker Isaac Boateng held some reservations about the new tax being imposed but stressed that reinvestment in the real estate sector could justify the decision. Mortgages, in his opinion, are critical to home access and there was a need for the government to subsidize this product.
“The real estate sector seems to be doing better than other sectors which is probably why the government has chosen to tax it. But it is also capital intensive and although it looks very profitable, there are a lot of costs involved, thus leaving little margins,” he explained.
Mr Boateng, who is the Chief Executive Officer of Isaac Anthony Homes, said the government should channel the accrued revenue into mortgage subsidy.
“They [the government] should look at ways of helping home buyers acquire properties, that is, subsidizing mortgage rates because they are too high. If they concentrate on subsidizing mortgages or assisting government workers through financial packages to acquire property, the sector could boom and justify the five percent [real estate VAT].”
Leading real estate developer Blue Rose Limited has also added its voice to the growing debate. According to Emmanuel Oppong Ayisi, a realtor at Blue Rose, disagrees with the new tax and suggests that levies imposed on imported materials should be reduced to cushion the effect on the real estate sector.
“I don’t think there should be a new tax imposed on us. However, the initial plan was to impose 17 percent, so 5 percent does make it justifiable in that regard. But once they [the government] have done that, we should see some improvement in the collaboration between government and real estate companies,” he said.
Affordable housing in Ghana has been in the spotlight in recent years due to the housing deficit. Mr Ayisi said that the government should channel the proceeds from the new tax into subsidizing affordable housing to make it more accessible for the majority of Ghanaians.
“If these taxes can be geared towards putting up affordable housing for the ordinary Ghanaian, then it is laudable. Also, if they [the government] can come to the aid of some real estate developers who have acquired land but need basic infrastructure in place, then we would see the benefit [of the real estate tax],” he said.
Managing Director of property website Lamudi Ghana, Akua Nyame-Mensah, stressed that both the government and stakeholders in the real estate industry could benefit if the real estate tax proceeds were reinvested in the sector. The five percent tax could ultimately increase the price of homes, Ms Nyame-Mensah said.
“The issue of taxation is not an entirely bad idea if the government invests the proceeds correctly. The collected taxes could be used to start a fund that could be accessed by developers that are interested in constructing affordable housing or in areas where the government is not investing in infrastructure. The funds raised could also be used to assist companies that develop local materials for construction,” she said.