Banks demand tax cuts to bridge housing gap
Banks in the country want government to slash taxes slapped on them to be able to offer cheaper mortgage loans to their customers.
They argue that the continuous imposition of taxes on interests earned on mortgages, make it difficult for them to reduce interests for the average Ghanaian to access mortgage services.
“If institutions like HFC are able to get some type of tax credit for the interest income; for instance if the government would say interest income on mortgages under ¢250,000 is tax free, it will mean that for the interest that HFC earns on mortgages under ¢250, 000, it will not have to pay tax on that income. But that is not the case as such, the high interest is a way that the financial institutions could pass on that tax,” Managing Director of HFC Bank, Robert Le Hunte told Citi Business News.
Currently, interest rates on mortgages hovers around 50 percent which serves as a disincentive for customers to access credit.
The situation is said to be impacting hugely on the country’s ability to solve its 1.7 million housing deficit gap which is also anticipated to increase to about 1.9 million by 2019.
However Robert Le Hunte explained to Citi Business News that slashing the taxes will help banks to also contribute better to the mortgage industry.
“If for example, the taxes are reduced, you can see the mortgage interest rate declining from about 50% to about 20 %,” he stated.
Meanwhile Robert Le Hunte has cited the uneasy accessibility to mortgages; short term nature of funds that banks receive to fund mortgages and the high interest rates as some critical challenges confronting Ghana’s ability to bridge the widening housing deficits.
Securities Industry Bill to facilitate mortgage in Ghana
As part of efforts to increase access to housing, the Securities and Exchange Commission (SEC) has intensified moves to get the Ghana Real Estates Developers Association (GREDA) to utilize the capital market to raise funds.
The move follows the approval of the Securities Industry Bill by parliament which allows the Securities and Exchange Commission to license Real Estate Investment Funds.
The Director-General of the Securities and Exchange Commission Dr. Adu Anane Antwi explained that GREDA can raise bonds on the capital market as an alternative measure to listing on the Ghana Stock Exchange (GSE) to help close the 1.7 million housing unit gap in the country.
“We have being engaging GREDA to ensure that they can utilize the capital market to raise funds to help in their operations and build more houses,” he said.
He reiterated that there is always an option for GREDA to raise bonds on the capital market to boost its operations.
Explaining the purpose of the Real Estate Investment Funds, Dr. Anane Antwi stated that the fund will serve as a mutual fund by mobilizing money to support stakeholders in the real estate industry.