Treasury amendment to condo builders on VAT sees sharp rise in apt. sales

The recent budget proposal to impose Value Added Tax (VAT) to condo builders which will be applicable on the sale of new condominium housing units with effect from next month has seen a sharp rise in condo sales, developers say.

The Treasury promised Condominium Developers Association of Sri Lanka (CDASL) in response to a letter by the CDASL that the VAT will be applied only on projects that began after April 1. Sales of apartments in projects started before April 1, 2018 will be exempt.

They were unhappy with the proposal to impose a 15 per cent VAT on the sale of Condominium Housing Units from April 1 2018, which was presented in the budget. CDASL members said that whilst they are aware of the need for bigger revenue to the Government and the intent to abolish selective exemptions, they are strongly of the view that the re-imposition of VAT on the sale of condominium housing projects which have already started construction and sales will be counterproductive and cause a serious negative impact on the industry. Now the buyers are scrambling to make the most of it.

"We sold 25 units in February which was the highest we sold in our history," a major developer told the Business times. He noted this month they expect the highest number to be sold at 35. Another builder agreed saying his sales are increasing at a considerable rate. “Many are buying at an increasing rate.” He said that most were bought by doctors and engineers, also entrepreneurs and those working abroad earning a good income.

A third builder added that their apartment sales are mostly generated from the diaspora. “We see that 30 per cent of sales are from the diaspora and less than 10 per cent are foreign buyers." Real estate sector analysts say this buying spree will slow down by April.