VAT on low-cost housing to worsen backlog

Colliers International research manager Joey Roi Bondoc told The STAR the removal of the VAT exemption on the sale of low-cost housing would make owning a house more expensive. File

VAT on low-cost housing to worsen backlog

Catherine Talavera (The Philippine Star) - July 26, 2017 - 4:00pm

MANILA, Philippines -  The lifting of the value-added tax exemptions on low-cost housing as proposed by the tax reform bill would exacerbate the growing backlog for houses, property stakeholders said.

Colliers International research manager Joey Roi Bondoc told The Star the removal of the VAT exemption on the sale of low-cost housing would make owning a house more expensive.

“Young professionals and those starting to build their own families will now have to shell out more to acquire houses,” Bondoc said.

Last May, the House of Representatives approved HB 5636 also known as  “Tax Reform for Acceleration and Inclusion,” which aims to improve Filipinos’ disposable income by reducing personal income tax for majority of its citizens.

Bondoc said the removal of VAT exemptions would have an impact on the country’s already large housing backlog.

“We see this exacerbating the current housing backlog which the Housing and Urban Development Coordinating Council estimates at 5.6 milion,” Bondoc said.

Data from the Subdivision and Housing Developers Association (SHDA) show that the country’s housing backlog is projected to balloon to 12.3 billion in 2030.

8990 Holdings Inc. president and chief operating officer Januario Jesus Atencio said lifting of the VAT exemption would make housing inaccessible.

“We’re going to make housing more inaccessible by increasing the price tag by 12 percent or more because of the imposition of VAT on mass housing and the significant reduction of investment incentives by the BOI,” Atencio said.

Atencio said while he understands the government’s need to collect more taxes, the contribution of the housing sector to economic progress should also be considered.

  “But development and progress is not all about money.  Take a look at housing and not only how it contributes to economic benefit as an industry the way other industries can not compare,” Atencio said.

Colliers International senior manager for research Dinbo Macaranas earlier said selling prices of low-cost housing could increase by as much as P384,000 due to VAT if the tax reform bill is approved.

 “The removal of the VAT exemption on residential leases amounting to P12,800 and less will also see additional increase in rental rates. The higher rents will consequently push vacancies up in existing condominiums,” the property consultancy firm said.

Vacancies in the Metro Manila condominium market are expected to rise with the pasdage of the tax reform bill into law as more than 49,000 condominium units are expected to come online until 2020.

The property consultancy firm is urging developers to be more creative in strategizing on how to pre-sell their projects and lease out their ready-for-occupancy units.

“We see developers stretching the payment terms to a few more months to ease the burden of condominium buyers,” Macaranas said.

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