Homeless to suffer most as VAT on housing looms

The millions of aspiring homeowners, that comprise the country’s staggering

6.57 million housing backlog as of date, are in for a major setback as the expiration of value added tax exemption privileges for housing purchases under government’s comprehensive tax reform program sets in by January 2021.

The Chamber of Real Estate & Builders’ Associations, Inc. (CREBA) has appealed to Congress anew to avert the looming value-added tax imposition upon socialized and economic housing purchases as millions of overseas Filipinos and low-income earners who have yet to fulfil their dreams of a having a home for their families will no longer afford the resulting surge in housing prices.

This untiring call-out to government takes a high pitch as the deadline for availment of VAT-exempt homes granted a three-year extension under Republic Act No. 10693 or the Tax Reform for Acceleration and Inclusion (TRAIN Law) up to December 2020 nears.

We, in CREBA, fear that the loss of VAT-exemption privileges by low-cost housing buyers will impede housing production targets that were laid out to curb the estimated 6.57 million housing backlog, as supply and demand gap gets wider by 300,000 units each year.

The TRAIN Law exempts buyers of lots valued up to ₱1.9 million as well as house and lot units valued up to ₱3.2 million from the payment of VAT. This is an extension of the 2011 adjustment made by the Bureau of Internal Revenue under the amended National Internal Revenue Code computed using prevailing economic conditions and consumer price index. Unless adjusted, the cap will be reduced to ₱2 million come January 2021.

This policy seems oblivious of the primordial role of government to provide housing for its citizens as a constitutional social right because it is a basic human need. Imposing VAT will push economic housing prices upward beyond the affordability of the millions of Filipinos who remain homeless.

Real estate developers have no choice but to fully pass-on VAT charges to homebuyers. As a oncein-a-lifetime housing purchase at the range of ₱3.2 million and below is usually availed of under longterm loans, the 12 percent VAT of about ₱360,000 per unit actually translates to ₱1 million over a 30year mortgage life.

What homebuyers need are fixed, low-interest, long-term housing loans assistance by government, not additional taxes that will bloat the purchase price. And since housing is globally-recognized for its economic multiplier effects, imposing VAT is a threat to the property sector’s current upward growth trend. The additional VAT on housing will not translate to actual revenue generation once a massive industry slowdown unfolds.

As housing is by itself already a heavily-taxed and highly-regulated industry, we appeal to our lawmakers to pass an amendatory bill that will preserve the status quo on VAT-exempt housing packages and provide the millions of yet homeless citizens of the country the chance to a dignified quality of life through decent and affordable homes.

‘What homebuyers need are fixed, low-interest, longterm housing loans assistance by government, not additional taxes that will bloat the purchase price.’