Discontent over proposed tax on unoccupied buildings in Abuja
The plan by the Federal Capital Territory Administration (FCTA) to tax unoccupied buildings in Abuja might have sent shivers down the spines of major stakeholders in the real estate sector.
Under this plan, owners of vacant properties in the territory will pay taxes to generate more money for the government.
The Guardian learnt that about 600 unoccupied buildings have been identified mostly in the highbrow districts of Maitama, Asokoro, Wuse, Apo, and Gwarimpa Estate.
But owners of these properties especially in the highbrow areas are worried about the proposed policy as it will worsen the plights of investors and developers, who are struggling to get buyers and renters for their properties. They say, many of these properties, which were built with credit facilities.
Apart from being chased about by creditors, the crunch in luxury apartments market where this category of buildings fall within, many of the landlords said they are now living in false projections and may lose their investments to creditors.
One of them, who pleaded for anonymity, said the government should focus on policies that will empower impoverished Nigerians that could take or buy these properties.
Also, an Abuja based realtor and the manager said, it might be a ploy by the government to seize the properties in the guise of defaulting in tax payment.
According to him, the plan may not be divorced from the recent move by the Independent Corrupt Practices and Other Related Offences Commission (ICPC) to begin an investigation into the ownership of the buildings on the assumption that civil servants owned most of the vacant properties.
But property manager and former chairman, Estate Surveyors and Valuers Registration Board of Nigeria, (ESVARBON), Elder William Odudu, said the policy could be to discourage property vacancies, as they are so many vacant properties, especially in highbrow areas. A lot of properties in Asokoro and Maitama, he said, are vacant because people cannot afford to buy them.
According to Odudu, it appears that the government is trying to force the owners of these properties to get them occupied by all means either by reducing rents so that people will occupy them.
It is a double punishment because some of these properties that are empty, the people who are fortunate to borrow money to build them are in trouble with the banks. The banks are threatening to take over these properties and if you go and tax them again, you are double punishing them.
The former president of Nigerian Institute of Estate Surveyors and Valuers (NIESV) said it is not a good policy. “That is not the right thing at all; they should find a way of encouraging investors. You know that the economy is bad. Those properties that are vacant now are highly-priced, only government officials and people who are in a position to make money can take them.”
Odudu stressed that Government can still put a law in place that if a property is vacant or not vacant you pay tax on it, so that people will find a way of getting them occupied.
“It cannot be good for the property market, we are already unhappy that a lot of properties are vacant because people are not taking them. The only way out is to confiscate the buildings and what will you even do when you confiscate them.”
He also said reducing the rent to attract rents will affect the investment expectations on these properties because if the owners borrowed money on the expectation of getting certain rent level and they cannot get that level, they cannot repay back their loans.
“Developers will now rethink about their development policies and projections for example, if you are going to build on a plot of land in Ikoyi and Victoria Island in Lagos and you are expecting that the minimum rent will be $65,000 per annum and after building you found out that you cannot even get $30,000 per annum, and all your projections are now wrong. If you borrowed money to execute that projects, you are going to have serious problems and you end up being a defaulter and the banks will eventually take over the properties and try to sell to recover their money, so it is not going to help anybody, it is going affect developers, because we will get fewer developers that are coming to invest them.
But former Africa President, International Real Estate Federation (FIABCI), Chudi Ubosi, thinks that the practice, which is fairly common, worldwide is a good step in the right direction and could serve several purposes.
He stressed that the policy could discourage speculation and landlords from acquiring properties they don’t need.
According to him, Abuja has a unique problem in the area of vacant properties, while there is speculation that a lot of those vacant properties belong to civil servants who have acquired them through corruption.
The tax, Ubosi said, will force a lot to either sell or at least enable the government to identify the actual owners of the properties.
“The tax will help generate more funds for the Territory especially as regards running their affairs. Finally Abuja has an issue with high rents. Maybe the law will force many of these Landlords to put their houses in the market for lease thereby flooding the market with accommodation which may in the long run force down rents”, he said.
Ubosi, however, said the policy could be rendered effective and could be a disincentive to further housing development, it is directed to investors and known developers, who have been making efforts to let their houses without success.
“I think the policy will be directed at those properties that their owners cannot be easily identified. It will not be directed at those who have been making efforts to let their houses without success. Anything else would render the policy ineffective and a disincentive to further housing development”, he added.
An assistant director of operations in the directorate of road traffic services in FCTA, Dele Yaro, who confirmed the plan to tax unoccupied buildings when he recently led the FCT ministerial joint task force on sanitation and demolition of illegal structures and workshops in Kado Estate.
According to him, “We have some buildings within the city that are not occupied by anybody and the government is looking in that direction.
“This is to ensure that going forward no property lies fallow without paying taxes. We now have a Board of Internal Revenue for the FCT. So, if your property is lying fallow, definitely you know you must pay tax on it.
“If the cost of renting or acquiring these buildings are too high and the owners are made to pay taxes on them every year, they will be forced to bring it down so that people can occupy them”, he added.
In a related development, the Federal Government has revealed a plan to rent out unoccupied private and government houses located in various towns and cities across the country.
Minister of Works and Housing, Babatunde Fashola, disclosed this in Abuja while playing host to the Senate Committee on Housing led by its Chairman, Sam Egwu.
Fashola also explained that the non-provision of land was why the Federal Government was not constructing houses in Lagos and Rivers states, adding that over 3,000 affordable housing units were being constructed in 34 states and the Federal Capital Territory.
Applauding, the Chairman, NIESV Faculty of Estate Agency and Marketing, Sam Eboigbe said it is a courageous decision coming from the minister and should be applauded.
He stressed that NIESV as a professional body had called on the Federal Government to end the culture of allowing national assets to deteriorate with the tiers of obsolescence physical, economic, functional etc running its cycle accordingly.
According to him, the proper way to go is for enumeration to form an asset register nationwide to be done by the appropriate professionals who would make appropriate recommendations as per the upgrade needed to restore the properties to an acceptable standard.
The recommendations, he said, should similarly include a professional opinion as per rental valuation of the properties.
“There should also be the invitation or appointment of appropriate professionals to undertake the management of the properties who would be saddled with all matters of effective property management commencing with tenant selection, lease administration, rent collection etc.
It would be a worthwhile exercise and will prove quite indispensable to seek the services of professionally experienced consultant estate Surveyors and Valuers who over the years have made representations to government on the need to preserve national assets as it could earn enormous revenue needed to salvage critical sectors.
“We call on state and other tiers of government to emulate the minister and follow it all the way as the era of government assets nobody’s asset is over”, he added.
Also, chairman, Lagos state branch of NIESV, Adedotun Bamigbola said it is good for federal government-owned houses.
According to him, it is easier said and can be done, once the Federal Ministry of Works and Housing sets up the framework to deliver the target as they form part of the housing stock indeed.
Bamigbola, however, said the same cannot be said of state and local governments properties, as the private properties cannot be rented out by the Federal ministry without an agreement between parties as it is obtainable in a transaction by private treaty.
“It is good that some houses for sale based on loan defaults can be captured in the plan through financial institutions, which will make it workable, to the extent to which individual financial institutions agree to be part of it.”
“That has to be based on agreeable economic or financial terms with the financial institution or property owners who may want to sell rather than lease it out or keep it vacant for whatever purpose the owner wishes.
“In as much as the owner pays the appropriate taxes and the property confirms with all necessary building regulation laws and codes, such plans may not be enforceable.
“It requires the buy-in of the property owner, otherwise there are legal and constitutional barriers to cross before it can be achievable”, he said.