Govt scraps transfer duty for first time home buyers

MBONGENI MGUNI
Staff Writer | Wednesday November 3, 2010 00:00

 

The Ministry of Lands and Housing is pushing the Ministry of Finance and Development Planning to drive through an amendment of the Transfer Duty Act that will result in first time buyers being exempted from the requirement to pay the duty.

According to the Act, the duty is payable on all sales of immovable property above P200, 000 at the rate of five percent of the value of the property.

Speaking at the Housing Pitso in Gaborone yesterday, Lands and Housing Minister, Nonofo Molefhi, announced that the government would soon approach the legislature for amendments to the Transfer Duty Act.

'Government has agreed to do away with the transfer duty for first time home buyers,' he said. 'We are waiting for the finance ministry to take the change to Parliament to facilitate that.' Molefhi explained that the government viewed the move as preferable to the contentious debate involving the scrapping of VAT on residential property purchases.

'A year ago, we approached Cabinet to say 'let's do away with VAT on houses',' he said. 'After further discussions with BURS, we were not able to convince them that it's a reasonable route to take, especially when it's only about finished and built up units.

'The major problem was that removing VAT from residential property purchases would also mean removing it from all building materials because it would be an unfair advantage on those who buy built units against those who build for themselves. As a result, we were not able to convince the government about that.'

While private sector property developers and sellers are prevented from charging VAT on sales above P200, 000, until 2006, the BHC required buyers to pay VAT upfront when buying property.

At present, buyers from BHC are able to pay VAT in instalments. The BHC --- the country's single biggest developer and retailer of residential property --- incurs VAT in purchasing materials for its housing developments.

Analysts believe the government's latest move will increase access to property for more Batswana. 'People are struggling because of these charges,' says Eddie Mdluli, a consulatant with Willy Kathurima.

'If you qualify for a P800, 000 loan and there are these other charges, you may end up failing to qualify for the loan because of the charges.'

'Many of these charges, levies and duties are non-negotiable and increase the amount of funding one will require from the banks.

'In fact, government duties, levies and other charges need to be reduced or scrapped. Access to housing is a part of poverty eradication. A student leaving university should be able to buy a house without having to look at the government.'

In the VAT debate, property guru Montshwari Mooketsi stressed that this was an issue of specifying. 'The problem is going to Cabinet with a blanket proposal saying exempt everyone from VAT on residential properties.

'VAT is a means of Government raising funds and its exemption should be to specific cases, not towards unintended beneficiaries. The ministry should be going to Cabinet to say first time [home] buyers should not pay VAT.'

Mooketsi also urged property developers and Government to adopt more efficient and cost-effective construction technologies as a way of reducing the cost of residential properties.