Nigeria’s new tax law will stimulate real estate investments —Experts

Experts in the housing industry have expressed optimism about the new tax laws, saying the regime would stimulate real estate investments and make borrowing cheaper for home buyers, as interest paid on mortgages is now deductible before tax computation.

Expressing this at different events when interviewed, President of the Nigerian Institution of Estate Surveyors and Valuers, Chief Victor Alonge; Managing Director/CEO, Fame Oyster and Co., Mr Olufemi Oyedele; and Executive Director, Housing Development Advocacy Network, Festus Adebayo, said the new tax regime is expected to have a positive impact on the real estate sector, boost investment and home ownership opportunities.

They added that the new tax regime will boost revenue, promote transparency, and encourage affordable housing.

“The law exempts small-scale businesses in the construction value chain and removes Value Added Tax (VAT) for the informal segment of the construction industry. This move is anticipated to stimulate real estate investments and make borrowing cheaper for home buyers, as interest paid on mortgages is now deductible before tax computation,” they said.

Explaining its key impacts on the real estate sector, Oyedele and Adebayo said that it would lead to increased home ownership, pointing out that rent relief would allow Nigerians to claim up to 20 percent of their annual rent, capped at N500,000, making housing more affordable.

Besides, they pointed out that the fact that residential properties are exempted from VAT, it would reduce costs for developers and homeowners.

They said the law gave room for mortgage incentives and 1.5 per cent annual tax on luxury property.

“Interest on loans for developing owner-occupied residential houses is deductible from taxable income.

“A 1.5 percent annual tax on high-end properties in prime areas may increase revenue to government which can used for affordable housing,” they stated.

“The law will promote transparency, efficiency, and structured investments in the real estate sector, but its success will depend on effective implementation and stakeholder engagement,” Oyedele said.

Adebayo said: ”The new tax regime allow tenants to claim up to N200,000 or 20 per cent of annual rent as tax relief, potentially increasing demand for rental properties.

“A 1.5 per cent tax on high-value homes (N500 million+) may discourage luxury property investments, potentially shifting focus to mid-range housing.

Increased Capital Gains Tax rates (30 per cent for companies, 15-25 per cent for individuals) may affect property valuations and investment decisions.”

“Residential properties are exempt from VAT, while commercial properties and construction services are still subject to 7.5 per cent VAT,” he added.

He noted that the Real Estate Investment Trusts (REITs) and Real Estate Investment Companies (REICs) are exempt from withholding tax.

These exemptions, he said would promote investment in the sector.

“However, I think it will slow luxury sales and impact investor confidence,” Adebayo said.

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