Despite the promising changes, the New Nigerian Tax Reforms introduced by President Tinubu, have sparked significant discussion regarding their potential effects on the housing market. Particularly, the absence of direct provisions for affordable housing and real estate investments.
Leading the dialogue on the issue, Festus Adebayo, Executive Director of the Housing Development Advocacy Network (HDAN), hosted a Zoom conference which was aired live on Housing TV Africa, titled Nigeria’s New Tax Reforms: What Effect on the Real Estate Sector? where Dr. Abiodun Adedipe, Founder and Chief Consultant of B. Adedipe Associates Limited (BAA Consult), presented a comprehensive analysis of the new reforms and how they may impact housing development and investment.
“The current administration’s move to consolidate tax provisions and address multiple taxation issues could greatly benefit the real estate sector,” Dr. Adedipe noted. He explained that Nigeria’s long-standing issue with redundant taxes has limited growth in real estate, especially for smaller developers. “For decades, multiplicity of taxes has stifled growth in real estate, particularly for small and mid-sized developers,” he said. The reforms aim to harmonize taxes at every governmental level, potentially reducing administrative burdens that have long posed challenges for real estate players.
According to him, President Tinubu’s administration introduced these reforms as part of four legislative bills: the Nigeria Tax Bill, Nigeria Tax Administration Bill, Nigeria Revenue Service Establishment Bill, and the Joint Revenue Board Establishment Bill. Dr. Adedipe explained that the goal of this package is to streamline Nigeria’s tax landscape to make compliance easier for businesses.
“The reform has great potential, especially if executed efficiently,” he stated. “Developers facing hefty upfront taxes will now find some relief, allowing more resources to flow into actual property development.” He stressed that these changes could redirect funds towards growth in the sector rather than being absorbed by layered tax obligations.
One aspect of the reform includes exempting essential goods and services from VAT, which could lower costs on construction materials and transportation, directly benefiting the housing sector. “Any reduction in the cost of materials, particularly in a high-inflation environment, could alleviate some financial pressures on developers and make housing projects more viable,” Dr. Adedipe explained.
However, some provisions have generated controversy among stakeholders. Northern governors and the Nigeria Economic Council have expressed concerns over the proposed VAT increase, intended to compensate for revenue reductions resulting from tax streamlining.
The reforms also implement a progressive tax rate structure, placing greater fiscal responsibility on wealthier citizens and larger corporations, a move aligned with global practices. Dr. Adedipe pointed out that this shift could drive more local investment in real estate by lowering the tax burden on smaller developers. “The progressive tax rates now place a heavier burden on higher-income individuals while sparing those at the bottom,” he noted. “This differentiation aligns with global tax systems and could encourage more local investment in housing.”
On his part, Adebayo emphasized during the conference that the lack of targeted provisions for affordable housing has sparked concerns within the real estate sector. Advocates have long called for tax reliefs on materials used in affordable housing construction, an area in which the reforms fall short. “For years, affordable housing advocates have sought tax breaks and exemptions for materials used in low-cost housing,” he said.
Dr. Adedipe acknowledged this gap and encouraged continued advocacy. “We should not overlook the economic role of real estate. As stakeholders, we must continue the conversation, urging policymakers to consider the unique needs of the sector,” he urged.
Conference participants including, Hakeem Ogunniran, the Founder and CEO of Eximia Realty Company Ltd. raised questions about the reforms’ likely impact on property prices, rent levels, and the tax treatment of real estate investment trusts (REITs). Ogunniran added that under the new tax reform, “Any distribution made under a REIT or REICO is exempted from deductions at source pursuant to Section 80 of CITA”. That’s a major breakthrough provision – completing the cycle of those asset classes as “transparent, flow through entities. That should enhance the growth of REITs and facilitate capital raising by real estate developers” he said.
Dr. Adedipe underscored the importance of ongoing advocacy during this critical legislative period, saying, “We have space to intervene and raise all these issues before these bills are signed into law.” In response, Adebayo said HDAN is ready to work closely with the National Assembly to secure provisions that would specifically benefit affordable housing and real estate investment.
Meanwhile, Dr. Adedipe also addressed Nigeria’s broader economic challenges, including high inflation, and noted that the reforms aim to foster a healthier tax culture and enhance revenue stability. He highlighted exemptions for small and micro-businesses, along with reduced rates for low-margin sectors, as measures intended to ease the burden on those most affected by economic pressures. “The reforms have taken into account that life is tough for both ordinary Nigerians and businesses, especially in real estate, where financing and costs are particularly challenging,” he said.
The discussions highlighted that real estate stakeholders still have time to advocate for specific adjustments to the reforms. Adebayo and Dr. Adedipe agreed that further concessions, particularly for affordable housing, would be essential to ensure that the reforms foster sustainable growth across all real estate segments.
