Source: Property developers decry high taxes -Newsday Zimbabwe
PROPERTY developers have decried the high taxes and levies tied to project development, noting that such costs account for more than 25% of overall development expenditure.
There has been increased interest in property as an investment class, as it is seen as a hedge against exchange rate volatility and rising inflation.
This has triggered an increase in developments, both retail and housing, to meet rising
demand.
Property Developers Association of Zimbabwe interim chairperson Arnold Khanda told NewsDay Business that the number of taxes and levies on development projects was ridiculous.
“To put in the sewer and the water, the council makes you pay to dig alongside the road, and don’t you dare try crossing the road,” he said.
“The fees would kill an elephant. So, all in all, levies and permits can take up 25% or more of total project costs, which is ridiculously high and creates a big
barrier to entry for small developers.”
Khanda said as developers, they felt like a “pig on a spit”, whereby the regulators and authorities were taking a slice out of the developers.
“A typical application for cluster homes has the following application fees of around US$5 000,” he said.
“This is coming from a previous fee of just US$250 for any number of clusters. This is after paying architects, surveyors, town planners, and engineers for a project that may or may not be approved.”
He said that after a few other costs, when the permit finally came out, typically, more development was needed, leading to more costs.
“One is supposed to pay the city to have water, sewer, and driveway designs approved — infrastructure that will be handed over to the city once installed,” Khanda said.
“For example, that would be around US$15 000. After getting this approval, there is an endowment fee of around 10% payable to the city. The city now insists on an EIA [Environmental Impact Assessment] in which you have to get comments from stakeholders such as Zesa, Zinwa [Zimbabwe National Water Authority]…and they all charge around US$1 500 for this.”
He added that the Environmental Management Agency also insisted on 2% of the total project as fees.
“Thereafter, for a medium-sized unit, plan application fees are around US$20 000,” Khanda said.
Businesses have called on the government to reduce regulatory taxes, costs, and fees, as these were now becoming cumbersome to investments and operations, a process the authorities have already
begun.
“Millions may pass through a developer, but also with the high taxes and levies, cost of building materials, and cost of the financing models, coupled with the fluctuations in a commodity as basic as cement in pricing and availability,” Khanda said.
“This results in costly project delays that erode expected profit, so one ends up in a well, a paid executive in a US$1 million company with no millions of their own to talk of.
“It takes time to become a millionaire. If you walk away with two to four properties on every project, eventually you will have US$1 million in assets. But, for you to have US$1 million in cash, in the bank, in this business, you will be doing something very wrong because that US$1 million will always be needed in the developments.”
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