Amidst a housing deficit estimated at 28 million units, experts are calling for reforms to the tax system to reduce the burden on developers and building materials producers. The current tax regime, which includes multiple taxes and inconsistent valuation methods, is stifling the growth of the housing sector and limiting Nigerians’ access to homes.
“The problem of duplicated taxes, inconsistent valuation methods, discriminatory rates, and the inclusion of ground rent has imposed a significant burden on stakeholders in the real estate sector,” said one expert.
Property tax, one of the most significant taxes in the real estate sector, is levied on homeowners based on the assessed value of their properties. The responsibility for tax administration often falls under the purview of state-level boards of internal revenue.
Property tax rates typically range from 0.14% to 3% of the property’s assessed value in different states. Local governments also collect property tax for public services such as roads, schools, and hospitals.
In addition to property tax, developers and building materials producers face a number of other taxes, including stamp duty tax, Capital Gains Tax (CGT) on property, personal income tax on property, tenement rates, Land Use Tax (LUT), and value-added tax on property.
The burden of these taxes is exacerbated by the current economic climate, which is characterized by instability and rising inflation. The inflation rate reached 26.72% in September 2023, making it difficult for developers to finance housing projects and for Nigerians to afford homes.
Experts are calling for a number of reforms to address these challenges, including:
Providing tax holidays for developers to offer more affordable housing options
Extending tax holidays to various types of housing developments
Providing incentives and tax rebates for building materials manufacturers to reduce the overall cost of materials
Reforming the mortgage system to make it easier for Nigerians to obtain loans to purchase homes
The government has shown commitment to tax reform through initiatives like the Presidential Fiscal Policy and Tax Reform Committee, which has proposed measures to address overlapping functions in public service. However, experts are calling for specific interventions in the real estate sector to stimulate activity and reduce the housing deficit.
Addressing the challenges posed by the current tax regime is essential to ensuring that more Nigerians have access to suitable housing options.
Source: Guardian NG