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Housing sector witnesses ‘investor drain, due to bureaucracy, taxes’

By Ahmed Bani Mustafa - Feb 20,2018 - Last updated at Feb 20,2018

The housing sector has been witnessing a decline in the size of business and relocation of investors to other ‘more business-friendly countries’ over the past three years (Photo by Amjad Ghsoun)

AMMAN — Tens of Jordanian housing investors have been moving their investments from Jordan to other countries since 2015, a sector leader said.

Hefty taxes, registration and licensing fees, red-tape and inconsistent legislation have altogether prompted investors to liquidate their companies, Jordan Housing Developers Association (JHDA) President Zuheir Omari told The Jordan Times on Monday.

This year, only 2,000 of 3,400 investors renewed their memberships in the association, Omari noted, adding that the number “does not mean that 1,400 investors have moved but surely indicates a reluctance to continue doing businesses in the Kingdom".

In 2017, the sector's trade volume dropped by 14 per cent compared to 2016, according to JHDA’s figures . 

A study by the syndicate showed that the sector pays the government 32 per cent of the volume of any given project in taxes and fees.

The president called on the government to reduce the ownership transfer fees from 9 per cent, which is “the highest in the region”, down to 5 per cent, or to sustain the exemption on the first 150sq.m from registration fees, which is given to first-time owners who buy from registered developers.

He noted that the sector feeds at least 40 other industries that are linked to construction, while creating thousands of direct and indirect job opportunities

Numaan Hamshari, an investor, stressed that the high investment cost and drop in Jordanian's purchasing power have forced him to relocate his investments to Turkey.

He added that fees, ‘high’ taxes, too strict regulations and complicated procedures” have pushed investors away from Jordan.

Another, investor Haidar Tamimi, found easier procedures and more profit in Cyprus and Kyrgystan.

He said that the “lack of clear procedures for investing in Jordan and temperamental treatment of some public employees have compelled me to look for a new location of my investments". 

Housing developer Aladdin Hassan cited the slow business as the reason to relocate. 

He stressed that he has not sold one single apartment during the past four months due to a recession caused by high construction costs and the declining purchasing power of potential customers.

In Turkey, he explained, he managed to register his new company “in less than three hours” and immediately received a membership of the chamber of commerce, while in Jordan, he claimed, it would take days, despite, for example, the fact that the Greater Amman Municipality is “overstaffed”. 

Hassan also criticised what he calls the “cartel mentality” of steel and cement providers, who, he charged, manipulate prices the way they want, which all goes unchecked by authorities. 

The stricter regulations on foreign labour have also led to rising costs, according to the investor, as now only guest workers who carry a construction work permit are allowed to work in the sector, a situation which has diminished supply and led to higher wages.

Sami Habash, another housing investor, has a different story to tell. He said he was shocked when he was asked to pay an “unnamed” tax to Naur Municipality worth JD17,000 as he applied to licence his project in the area , 13km southwest of Amman.

“When I saw the papers, the name of the tax was ‘construction fines’,” the investor said.

“How come an investor is required to pay construction-related fines when the construction itself has not started?” he asked.

Attempting to retrieve his money, he reported to the Ministry of Municipal Affairs, where he was told that it was up to the municipality to return the money or not”. 

He visited Naur Mayor Zayed Sawaeer, who told him that the tax was in return for the municipality’s efforts to provide infrastructure and regulate the projects for the local community.

When contacted by The Jordan Times, the mayor said that the tax was levied by the previous municipal council, valued at JD8 per each square metre to control “arbitrary” housing projects and in return for the provision of infrastructure and other services.

Sawaeer said when he came to office, he lowered the tax down to JD4 per square metre.

Jordanians topped the Arab list of investors in Dubai’s property market in 2015 with an amount of $950 million, according to Dubai Land Department.

He said “JD4 is a humble tax and investors have to help the local community”.

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