SOURCES in the real estate industry have said that a massive reduction in taxation on the purchase of homes enacted by the government last month has breathed new life into the long-moribund property sector.

The Ministry of Finance and Revenue notified related ministries and government officials on August 12 that sales tax on real estate throughout the country would be reduced from 50 percent to 15pc and 12pc depending on the value of the property.

“Buyers quickly realised that this was a good opportunity for them,” said U Zaw Zaw, a marketing manager at Unity real estate company in Yangon. “Now demand is exceeding supply for property in hot locations in Yangon, such as downtown, Shwe Taung Gyar (Golden Valley) and some commercial districts.”

“There had actually been a lot of people looking for homes to buy and inspecting property but the deals were delayed for various reasons. But the reduction in taxes has convinced many of them that spending money on property is a good idea,” he said.

According to the August 12 notice, sales tax on properties valued at K5000 million or less has been reduced to 15pc, while property purchases costing more than K5000 million will be taxed 12pc.

Under the new scheme, for example, a property valued at K100 million will be taxed K15 million, making the total purchase price K115 million. By comparison, under previous tax regulations the total cost would be K150 million.

A legal expert who specialises in preparing contracts for real estate purchases said buyers in the market have been quick to understand the advantages of the reduced taxes.

“I have been handling more and more real estate contracts since the announcement was made,” he said.

The announcement said the reason for the tax reduction was to enable more people to legally buy and own homes at a lower cost.

However, the announcement warned that “money spent in buying and selling properties under the announcement must not be related to any illegal businesses or criminal cases.”

U Than Htun, a legal consultant from Unity real estate company, said that despite the reduced taxes, the government would likely enjoy increased earnings under the new initiative.

“People were reluctant to pay taxes before because they thought they were too high. In the past, most deals were made through mutual understanding between the buyer and seller without officially registering them with the government,” he said.

“But now people are happy to pay taxes at low rates so they can legally own the home they buy,” said U Than Htun, who is also a market adviser for the company.

U Zaw Zaw also pointed out that with demand for property rising in some areas of Yangon, it would not be long before property values also started increasing.
“Now is the time to buy a home before prices get too high,” he said.

Meanwhile, the govern-ment had announced in June that it was initiating a plan to establish a network of committees at the township level to assess property values to help prevent fraud and corruption.

Each township will have its own assessment committee, which will be headed by a township Internal Revenue Department comprising six representatives from other departments and the police force, the government announcement said.

The Ministry of Finance and Revenue will collect taxes based each committee’s assessment of property values, it said.

U Than Htun said the initiative was a positive step towards the further development of the role played by the private sector in the country’s real estate industry.

“The old taxation system was approved in 1976 when the then-government focussed on developing the public sector without encouraging the private sector to own land, homes and businesses.

“But the economy has shifted towards a market-oriented system since 1988 and private businesses have been encouraged to cooperate with the government,” he said.

“And now with the reduction of the tax burden, it’s the real estate sector’s turn to play its part in developing private interests in Myanmar,” U Than Htun said.