The Ghana Real Estate Developers Association (GREDA) wants a review of the flat five percent Value Added Tax (VAT) imposed on all housing units, as more people are pushed outside the band of home ownership.

Samuel Amegayibor, Secretary to the Executive Council-GREDA said: “Our position has been that we don’t need additional taxes at this moment. Looking at our already-existing huge housing deficit, it is not getting any better…it is worsening.

“Over for the past ten years we have not been able to confront the deficit, and the gap is widening as the years go by. What rather should have happened was to introduce incentives that drive/attract the private sector into the industry. But unfortunately this is not happening, rather tax and tax. We think its wrong timing.”

Ghana’s housing deficit is estimated at about 1.7 million. Experts say the country needs to provide about 170,000 homes annually for the next 10 years in order to bridge the existing gap.

Various sources estimate that Ghana’s population could reach 32.2million people by 2020, with about 57 percent living in urban communities.

The GRA said in a letter dated September 29, 2015, addressed to the Chief Executive Officer of the Ghana Real Estate Development Association (GREDA): “It should be noted that in accordance with Regulation 45 of the Value Added Tax Regulations, 1998 (LI 1646), for contracts concluded between two or more parties before October 1, 2015, the terms of which did not include provisions relating to the tax, the supplier shall recover the tax due on any taxable supplies made under the contract after October 1, 2015”.

This retroactive application of the tax is creating challenges for those who bought houses on mortgages before October 1, 2016 and are still servicing their facility.

“The tax itself is burden, and now you are going back to tell your clients that transactions which took place in the past and were not fully concluded will attract VAT. This is against the laws of the state. I don’t see why state agencies would go ahead and perpetrate an illegality.

“If you have clients that are struggling to pay for houses purchased in the past and you are slapping taxes on them and retroactively applying the law, it is going to have an effect on home ownership and our business. We the developers want to take this up with goverment to remove it,” said Mr. Amegayibor, who is also the Managing Director of Homes Direct.

Baffour Akoto Osei, Chief Executive of GHS Housing Limited, also bemoaned application of the 5 percent flat VAT on houses, saying: “Already, it very difficult for clients to buy houses”.

He added: “Private individuals and public servants who were buying houses in 2010 and 2011 have declined to zero. All those that are now able to buy houses are those drawing mortgages from their companies; and even then, you have to give them a payment plan to make up the small difference -- they don’t even qualify.

“This VAT will only increases house prices, limits the number of people who qualify for mortgages, and puts developers out of a job.”