Ghana Homes Blog
Real Estate Developers Expectations from The New Ghana Government – Part I
A new government is in place in Ghana and already stakeholders in the real estate industry are agitating for the fulfillment of some promises made before the general elections in 2016.
One of such promises was the abolishment of the 5% VAT which affected commercial and residential properties developed by real estate developers.
In January 2015, the previous government introduced a 17.5 percent tax on real estate. The industry players were not happy about the tax and after deliberations and negotiations between the Ghana Real Estate Developers Association (GREDA) and the government, the 17.5 percent was replaced with a flat rate of 5%. In October 2015, a statement from the Ghana Revenue Authority was issued to inform the general public, and in particular mortgage providers and operators in the Real Estate and Construction sector, that The Value Added Tax (amendment) Act, 2015 (Act 890) obliges real estate developers to charge and account for VAT on taxable supplies of immovable property at a flat rate of 5% on the value of each taxable supply; and that estate developers engaged in the sale or supply of immovable property are required to charge and account for VAT.
Though there was a reduction, many real estate developers were not happy and requested that it be scrapped. They reasoned that the imposition of this tax meant that many low-income earners will not be able to access mortgages since there will be high mortgage rates and eventually purchase a house. Also, prospective house owners may be scared away looking at the striking increase in prices of houses since the 5% will finally be borne by the new home owner.
Following the above explanations, operators in the real estate and construction sector are eagerly anticipating for the total scrapping of the 5% tax introduced in 2015. Accordingly, many prospective house owners and industry players expect the new administration to live up to expectation by ensuring that they fulfill their promise to bring relief to developers and consumers. This will encourage spending; thus, there will be an increase in sales. It will reduce the burden on estate developers resulting in an appreciable growth rate in the economy and allow more people to access or qualify for mortgages.
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