The parliament’s General Committee is currently discussing the approval or rejection of the value-added tax (VAT) law submitted by the government on August 28, according to Daily News Egypt.
The VAT law is a goods and services tax that, if imposed, will subject all goods and service to a sales tax, except those exempt from the law. The debate in parliament is whether the tax rate should be set at 12% or 14%, as proposed by the Cabinet.
The VAT rate on construction contracts is proposed at 5%. The Real Estate Investment Division at the Federation of the Egyptian Chambers of Commerce (FEDCOC) is demanding a rate reduction to 4% instead of the proposed 5%, and that it only be applied to new contracts, not retroactively on older contracts.
Real estate prices are expected to increase by 15-20% over the next year due to the pound’s depreciation and the VAT law, according to Ahmed El-Hitamy, General Manager of Madinet Nasr Housing and Development (MNHD).
The government is expecting to raise the state coffers by EGP 30 billion in the current fiscal year when the law is implemented.
The VAT law will not be the only factor driving the price hike in real estate properties. The cost of construction materials and the dollar crisis is also projected to affect property prices.
Construction materials, primarily steel, saw a 50% increase in the price per tonne, where steel prices have registered up to EGP 800 per tonne, according to Al Mal News.
The rise in construction material prices and the dollar shortage in the market prompted El Diwan For Real Estate & Tourism Investment to increase real estate prices by 30%, said Nabil Shawky, the company’s CEO.