Real estate developers have raised concern over the proposed five per cent levy on sales and transfer of immovable property valued above Rwf30 million ($35,109).
The levy is one of the proposals made in the new income tax Bill currently under review in parliament. Players in the housing industry say the proposals will increase the cost of housing and put affordable homes out of the reach of many.
“The heavy burden will be felt by property buyers, because sellers will pass on the five per cent tax surcharge to them. More exemptions are needed to achieve the target of affordable housing,” said Vincent Sekimondo, a real estate developer in Kigali.
He added that the government was already earning revenue from the sector through taxes that are levied on building materials.
Rwanda aims to reach a 35 per cent urbanisation target by 2022. This is despite complaints from that owning land in the country is expensive and out of reach for many.
The draft income tax Bill is being reviewed by the parliamentary committee in charge of budget since it was tabled in 2016.
Defending the Bill, Finance Minister Claver Gatete, said Rwanda was experiencing a housing boom and the sector should make its fair contribution to the national budget.
Parliament, however, says there is a need for more consultations before further deliberation on the Bill.
“We have agreed with the Finance Ministry to seek more support and input from other experts. We were told that they are meeting consultants from the World Bank and International Monetary Fund before they appear before the committee again,” said Theobald Mporanyi, a member of the budget committee.
The levy will not apply in case of a transfer of immovable property to the child of a deceased person, aged below 21 or a surviving spouse under community property, among others.
In July, the Cabinet approved a Rwf200 billion ($234 million) fund to facilitate access to affordable housing, through mortgage finance at interest rates as low as 10 per cent instead of the current 17 per cent.
It will be managed by a group of banks under the supervision of Development Bank of Rwanda and targets people that earn between Rwf200,000 ($234) and Rwf700,000 ($819) a month.