The demand for mortgages is likely to soar following the announcement of the removal of the 5 percent Value Added Tax (VAT) on real estate sales, industry players have projected.
According to the Executive Secretary of the Association, Sammy Amegayibor, the removal of the 5 percent VAT means more prospective home buyers can afford to buy homes.
“The removal of the VAT means the purchasing power of Ghanaian home buyers has been enhanced. Assuming someone’s income allows them to only afford homes that cost GHC200,000 and less, with the removal of the 5 percent VAT that person can now afford a mortgage of GHC210,000 for GHC200,000,” Mr Amegayibor explained.
He noted that this means more people will fall within the qualification for a mortgage
Mr Amegayibor lamented that the tax has been a burden to the developer just as it has been for the developer where it has negatively affected sales of real estate companies and increased the cost of houses for Ghanaians.
“We have been arguing with government since 2014 when it introduced this VAT, then it was 17.5 percent and later reduced to 5 percent. Our argument has always been this is not the right time to tax the sector when the country is having a huge housing deficit. Government must rather give incentives to developers to make homes cheap for Ghanaians,” he said.
According to estimates, approximately 85,000 new and existing homes are sold on an average each year in Ghana. However, that figure has been falling in the past few years. This means that bridging Ghana’s housing deficit of some 2 million units is even becoming more difficult a task.
The Executive Secretary of GREDA said his Association will ensure that all members seize to charge the 5 percent VAT when it comes into effect.
Charles Bonsu, General Manager at HFC Bank said the removal of the tax will improve the property market and increase demand.
“It’s a good thing. By taking the 5 percent VAT off, I expect houses to go down by 5 per cent and this would not just increase demand for mortgage but increase demand on the general property market,” he noted.
He said it was a bad move for the previous government to have introduced that tax for the real estate sector.
Executive Director of Lakeside Estate, Mr Salah Kalmoni said the tax relief when passed on to customers will increase the demand for homes, as such mortgages.
“Home buyers are expected to pay between 20 and 25 percent of the total amount upfront for a mortgage, the amount involved is sometimes too much and they can’t afford it. So by removing the 5percent VAT, it would reduce the value of the 20” percent they are expected to pay. This will definitely boost sales,” he said.
Mr Kalmoni commended government for hearing out the plight of developers and abolishing the tax on the sector.
He is optimistic that the real estate sector will slightly recover this year but forecasts that substantial growth will be recorded in 2018.
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