LLR bemoans 2019 transfer duty amendments
Letlole La Rona (LLR) has bemoaned the impact of new Transfer Duty Amendment Act of 2019 on the country’s real estate industry, as increased transfer duty for non-citizens from five percent to 30 percent has hampered business.
With intentions to dispose some properties no longer fit for their strategy, LLR is struggling to find customers, as foreign investors shun from the sharp transfer duty fees. Speaking to Botswana Guardian, LLR Chief Executive Officer, Kamogelo Mowaneng, on the sidelines of the company’s half year results announcement, revealed that the transfer duty changes are suffocating the industry.
“It was a good initiative (Transfer Duty Amendment Act of 2019) but now practically what is happening is that it’s hurting companies on the ground and deterring investors,” said Mowaneng, adding that the 30 percent transfer duty is pushing away foreign direct investment. With a sizeable number of properties on the local market, LLR further indicated that the tightening of the regulatory environment, adds to on-going high inflationary environment headwinds.
Previously, both citizens and non-citizens used paid tax at five percent, with non-citizens only paying 30 percent on the acquisition of agricultural land. Analysts indicated prior to enactment that the increase was likely to make the acquisition of property by non-citizens a mammoth task due to the costs involved. Meanwhile, non-citizens currently only have to pay 18 percent transfer duty if they manage to acquire property from VAT registrants, and currently, non-citizens have been reduced from the purchasing pool, which has led to a slowdown in property sales.
On citizen exemption which previously stood at P200 000, the new law increased it to P1million, a 400 percent increase, making property ownership much easier for citizens. Citizens will not pay tax on the first P1m of the value of immovable property which is not also covered by another exemption, the exemption can be enjoyed multiple times in a tax year or in one’s lifetime as it is not limited.
Despite the prevailing challenges in the property industry turf, LLR has reported increased revenue by four percent in the six months ended December 2022 of P50.2 million from P48.4 million reported in the prior comparative six months.
“We are encouraged by the strong results, notwithstanding a challenging economic environment. Our performance was mainly underpinned by annual lease escalations, our quality tenant base and below average market vacancy levels, especially in our warehouse portfolio,” said Mowaneng.