State advised to abolish taxes on house rent

Dar central business district
Charging value added tax (VAT) on residential houses is suffocating growth of the infant real estate industry and frustrating efforts of low and medium income families to acquire decent houses.

The Tanzania Mortgage Refinance Company (TMRC) Chief Executive Officer, Mr Rished Bade, told the 'Daily News' in Dar es Salaam yesterday that charging 18 per cent on prices of residential houses as VAT was backpedalling progress being made by the infant real estate industry as it leads to higher prices which the majority of families cannot afford.

"We are engaging the government through Ministries of Land, Housing and Human Settlement Development and that of Finance and Economic Affairs," Mr Bade said saying there is need for flexibility by the government to assist the struggling industry to grow and meet demand.

According to Ministry of Land, the country has a shortage of an estimated three million housing units mainly in urban centres with an annual increase of 200,000 units. 

With a population of over four million people in Dar es Salaam alone and 70 per cent of settlements classified as slums, demand for decent homes is high but prices are holding back many low and middle income families.
With inflation at almost 20 per cent and bank interest rates at between 14 and 25 per cent, prices of new houses have quadrupled so too is rent. 

"At least new residential houses or houses bought under mortgage facility should be exempted from VAT to allow more low and middle income families afford to buy them," Bade argued.
National Housing Corporation (NHC) which is the country's largest real estate owner with over 7,000 units countrywide and its tenants have already called on the government to waive VAT on residential houses which was introduced by Finance Minister, Mustafa Mkulo last June. 

NHC which used to pay 250m/- in taxes to Treasury is now paying over 600m/- thanks to VAT imposition on residential houses.

A senior budget official at the Treasury said VAT on residential houses is one of the items being discussed for possible abolition in the next budget.

 "But that will only depend on government finding an alternative source of revenue which stakeholders should assist to identify," the official who requested not to be identified, said.

The TMRC CEO said abolishing Vat on residential houses will help encourage real estate investors and banks speed up construction of residential houses and give clients loans. "TMRC is for all real estate developers and not only NHC," he pointed out.

Real estate investors are also demanding a regulatory authority for the housing industry which is dominated by sole proprietors many of them don’t respect rules of demand and supply in the market.
Source: The Daily News,www.dailynews.co.tz, reported by Finnigan wa Simbeye
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