Monday, October 15, 2012

New 10% tax on developers who don’t build fast enough

The cabinet today decided that developers who do not build homes on lots they hold will pay a tax of up to 10% of the price of the land when it is sold. Revenues from this penalty tax could amount to tens of millions of shekels on lots in high demand areas in central Israel. The cabinet approved an amendment to the Land Tax Law, with the objective of increasing the housing supply by taxing developers who hold on to land for years without building on it. In some cases, the developers are trying to maintain price levels. The Trajtenberg Committee recommended increasing the housing supply by encouraging construction on lots zoned for residences by amending the law by the end of March. Over six months later, the cabinet approved the bill, which applies the stick to contractors, rather than the carrot. A developer who owns a lot zoned for at least 200 apartments for up to three years without starting construction, will be exempt from the tax when the land is sold. In the fourth year, a 1% tax will be levied on the sale price of the land; in the fifth year, the tax rate will be 6%, and in the sixth year and later, the tax rate will be 10%.

Beginning three years from the publication of the bill in September, a developer who does not sell the land, but finally begins building on the land will pay a tax on the sale proceeds from the apartments as follows: in the fourth year, a tax rate of 0.5% on the sale proceeds of each apartment; in the fifth year, a tax rate of 3%; and from the fifth year, a tax rate of 6%. Association of Contractors and Builders Association president Nissim Bublil told homebuyers response, "The government today is hitting you with a fine." He added, "The Israeli government continues its campaign of errors on all matters relating to housing solutions. The latest measures by the prime minister and finance minister have only resulted in higher home prices."

Bublil said, "Contractors are not holding land because they want to. Even when there are lots with approved building plans, the road to construction and sales is long and involves obtaining building permits, permits, and restrictions from the planning commissions, a process which can drag out for years. The contractor cannot expedite the process. The moment the government fines contractors, they will pass the cost on to young couples who will pay the price."

Source Globes

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