With a housing deficit estimated to be 1.8m units, Ghana is looking to boost the number of residential premises by providing tax incentives to local and foreign investors to develop affordable housing. The country provides such breaks to attract foreign direct investment, and these offers include corporate income tax exemptions, tax holidays, the use of free zones, capital allowances and a guarantee against government expropriation of property.
Incentives
Ghana is offering a five-year tax holiday to encourage real estate developers to build low-cost, high-quality housing targeted at low- and middle-income households. During the initial five years of operation, income earned by qualifying companies is taxed at 1%. Real estate developers are expected to build housing units that satisfy demand and the needs of low- to middle-income households, aiming to enhance affordability, particularly for public sector employees Real estate developers reap benefits from the tax exemption on import duties for plant, machinery and equipment for construction activities under Ghana’s harmonised system code. This encourages investment in the sector, and boosts economic growth. With reduced import duties private developers are empowered to use advanced construction machinery without added financial strain, enhancing capabilities, improving efficiency,and expediting high-quality project delivery. Under the Customs, Excise and Preventive Service Management Act 1993 private real estate developers can apply for exemptions to the Ghana Revenue Authority from import duties and related charges on plant, machinery or equipment if such items are not exempt from value-added tax.
Tax exemptions for companies operating in free zones in Ghana provide private real estate developers with significant benefits, and more developers are being encouraged to take advantage of them. Under the Free Zone Act of 1995, private developers in respective zones enjoy various tax benefits, such as a 10-year exemption period, after which entities are required to pay a corporate income tax rate of 15%. This has helped developers allocate more resources towards expanding projects and enhancing profitability. Additionally, employers who hire recent graduates earn an additional tax deduction that varies from 10% to 50% of the salaries of such employees.
In tandem with tax incentives, lessons learned from the Covid-19 pandemic underscored the need for developers to have a diverse network of suppliers, taking into consideration contingency planning for unforeseen disruptions. “To ensure resilience, real estate developers must accelerate the adoption of digital solutions for both their international and local supply chains,” Ann Brewin, CEO of Clifton Homes Ghana, told OBG.
Government Programmes
Ghana introduced a tax incentive framework under its One District, One Factory (1D1F) programme that launched in 2016 to accelerate industrial growth. This has helped lower construction costs, as developers can purchase building materials locally instead of relying on imports, which can raise prices and make homeownership less affordable for low- and middle-income earners. One project under the 1D1F programme is the Twyford Ceramics factory, which was commissioned in January 2018 with a designed production capacity of 14.4m sq metres annually and $82.8m in projected sales. Such a facility could help reduce tile imports in the real estate sector, which in turn could help reduce demand for foreign currency and stabilise the Ghanaian cedi.
Private developers are encouraged to leverage the available tax incentives, playing a pivotal role in assisting the government’s efforts to alleviate the country’s housing deficit. Many Ghanaian real estate developers have seized these advantages, employing them to optimise their profits. Beyond the individual benefits, these tax incentives have attracted local and foreign investment to the sector, fostering increased confidence in real estate development within the country.
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