The proposed 15% VAT on the sale of condominium housing units with effect from April 2018 will have a severe negative impact on the industry, said Secretary General and CEO, Chamber of Constriction Industry, Nissanka Wijeratne.
Speaking to ‘Daily News Business’ he said the current construction cost in Sri Lanka is the highest in the region. “If you take the cost per square foot, it’s more than that of Dubai or even Singapore,” he said.
Wijeratne said that with the increase of VAT being added to the cost, Sri Lanka would lose the competitive edge they are having for housing units especially from foreigners.
“It will also be a negative factor for foreign direct investments.” As the input VAT has already been absorbed as a cost, this change could potentially result in the increase in the prices of apartments.He said that apart from that the additional cost of 15% would also make housing a ‘super luxury item’ in the eyes of the middle class. Wijeratne said that the biggest problem would be for the people who have paid advances for housing units that are currently being built.
“They have to find additional funding to raise more capital and this is very unfair for them.”
The best way to implement this would have been to implement this 15% VAT for new projects that would commence from May 2018.
He also said that they are not sure if the VAT would be charged on the condominiums that are being built in the Colombo Prot City. “We think they would be exempted from this as the development comes under a Strategic Development Act.”
Minister of Fiance Mangala Samaraweera during the budget speech said that condominium developments in which all condominium units are priced at less than Rs 10 million will not be subject to VAT even after April 1, 2018.
Meanwhile one of the leading developers said that they were not in a position to absorb the 15% VAT due to the escalating cost of construction. “We will have to pass this on to the customer which will result in the drop of sales,” he added.
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