NHC:VAT hinders low income earners from buying buying homes

By Nelson Kessy

The NHC Director General Nehemiah Mchechu.

High Value Added Tax (VAT) has been cited as among factors hindering low income earners to purchase houses sold by National Housing Corporation (NHC).

The corporation is now appealing to the government to revise the VAT system and give VAT relief on houses valued at less than Sh100 million.

The NHC acting head of communication Muungano Saguya said majority of Tanzanians failed to purchase houses because of the high price caused by VAT.

“High rate of VAT is sending up the cost of houses…so if the government will agree on modifying the tax law, especially VAT, low income earners will get an opportunity of owning houses of their standard.”

He said construction of houses currently had decreased due to increased VAT, I believe once the VAT increment is lowered more houses will be constructed.

“Previously, people could get NHC houses as the corporation was receiving government help as well as support from West Germany; the government was providing 40 percent in subsidies while Germany was providing 37 percent.”

The remaining 13 percent was raised by the corporation through its rent collection from its houses. In 1976, the NHC had 14,865 houses.

Since 2002, the government has given a go ahead for NHC to operate commercially, relying largely on loans from financial institutions. NHC had accumulated a debt of Sh12 billion.

Some of the laws and policy were restricting the corporation from moving forward, like Act No. 17 of 1990 that restricts NHC from terminating the occupancy of a tenant even if they failed to complete paying rent.

“The Housing and Settlement Policy of 2000 should be modified to state clearly the difference between housing and settlement since they are two different things,” he added

He also called on both government and non government organizations such as the National Social Security Funds (NSSF), the Parastatal Pension Fund (PPF) to provide real estate in Tanzania.

The NHC Director General Nehemiah Mchechu said in October last year that the corporation’s five-year strategic plan had projected to develop 15,000 housing units.

Some 10,000 units wound be for middle and high income groups, while 5,000 for low income earners. “Although the development might not be able to address shortage of houses, it can establish the benchmark and create the catalyst for other developers to facilitate the delivery of houses in the country,” he said.

Mchechu asked municipal councils and regional authorities to shun bureaucracy and support NHC initiatives to reduce the shortage of homes.