BY BONNIE MODIAKGOTLA
The ministry of Finance and Economic development has amended the Transfer Duty Act to exempt citizens from paying transfer duty for properties or land valued at P1 million or less, as parliament passed the Transfer Duty amendment Bill.
The Transfer Duty Amendment Bill was published on November 2018, and was debated during the current sitting of parliament, which began earlier this year. The Bill seeks to amend the Transfer Duty Act to make improvements taking into account the growth of the economy since the existing Act was put in place. The amendment Bill also addressed existing loopholes in the Act.
The Bill which has now been approved by parliament this week exempts first time home buyers (citizens) from paying transfer duty, while increasing the threshold for payment of transfer duty for citizens. A transfer duty is a form of property tax that is paid when a property is purchased or acquired, and is usually tied to the value of the property.
According to Botswana’s current Transfer Duty Act, the transfer duty is paid by the buyer of a property, or anyone who becomes entitled to any such property by way of exchange, donation, legacy, testamentary or inheritance. Botswana’s Transfer Duty Act stipulates that a transfer duty rate of 5 percent is levied on citizens when they acquire land or property.
The older Act exempted citizens from paying transfer duty on property or land valued below P200,000. When the amendment Bill was published last year, minister of Finance and Economic Development, Kenneth Matambo, had sought to raise the threshold to P500,000. Following rigorous debate in parliament, legislators argued that value of property and land had gone up, and suggested that threshold be raised to P1 million, meaning that citizens will not pay transfer duty on properties valued at that amount or less.
The decision by legislators comes amid falling prices for high end residential properties due to waning demand coupled with commercial banks’ cautious lending. However, prospects look good for low to medium cost properties, according to Bank of Botswana’s most recent monetary policy report.
The central bank’s report – using data from the Ribery Report compiled for 2018’s third quarter market performance ÔÇô reveals that the low-end and medium-cost properties continued to have good demand and supply, and this demand for lower-end prime located residential housing is expected to improve in the short term.
Still, demand has been weak for high-end residential properties, with average prices for residential property sold in the third quarter of 2018 falling by 11.6 percent to P710, 748 compared to the previous quarter, and this was seen as a reflection of weaker demand for expensive homes, the report said.
The report further warns that the current lending environment is likely to impact negatively on value prospects for medium cost and higher end residential housing. Commercial banks have been limiting their exposure of high-end mortgages as the houses have proved too hard to sell during loan defaults.