April sales down due to false VAT alarm: May looks good

While the month of April wasn’t as good as March for apartment sales, builders say May looks promising.

The 15 per cent value added tax (VAT) on sales of apartments from projects after April 1 won’t be effective from April 2018, as planned earlier, but this notion that it ‘will come’ had hastened many sales for condo builders in March. Before the start of April the buyers were rushing to make the most of it.

A major developer told the Business Times that March was the month they had the highest sales. Another builder said his sales increased at a considerable rate in March. “Many were buying in March, but April was slow due to the confusion on this taxation and also holidays,” he said adding that March buyers were mostly doctors, engineers, entrepreneurs and those working abroad earning a good income.

He added that most sales for April were exhausted in March as buyers and builders had both rushed into the sales owing to the supposed taxation.

Another builder added that their apartment sales in March were mostly generated from the diaspora. “We had about 30 per cent sales from the diaspora and less than 10 per cent are foreign buyers."

All builders said that this month seems to be fine and they are getting many sales requests.

Developers opposed the budget proposal to impose a 15 per cent VAT on the sale of condominium housing units from 1st April 2018. Developers said that whilst they are aware of the need for bigger revenue to the Government and the intent to abolish selective exemptions, they are of the view that the re-imposition of VAT on the sale of condominium housing projects which has already started construction and sales will be counterproductive and cause a serious negative impact on the industry.

The Treasury then deferred this tax for a year and it will now be enforced from next year April, Finance Minister Managala Samaraweera confirmed at a recent media conference. This VAT was in effect a few years earlier and was removed in the 2015 budget. It was deferred mainly since the amending legislation to enable this process hasn’t been presented to Parliament as yet, the Business Times learns.