Mahfood knocks 30% tax burden on homebuyers
John Mahfood, the chief executive at Jamaican Teas which operates a real estate arm, blasted "anachronistic" laws and taxes surrounding the real estate sector which results, he says, in homeowners paying 30 per cent more for units.
Mahfood, who presented at the Jamaica Stock Exchange's annual conference on Wednesday, avoided a timeline for the listing of the real estate arm of the mainly tea manufacturing company, but signalled it was still under consideration.
Regulations surrounding real estate development "are like in the 17th century, so no smart person is going to come to Jamaica and invest in the real estate market because of the difficulty of going through all the delays," he said, alluding to his company's latest residential units in St Thomas, where some units finished from last May still await titles.
Taxes are such that developers are charged import duty on all materials, GCT on fixtures in the house and transfer taxes, Mahfood said at the two-day conference during a panel discussion titled, 'Start, Run and Grow your Business: Practical Advice from the Experts'.
"For every house you buy you pay 16.5 per cent in GCT, you pay 20 per cent on duty, then stamp duty and transfer tax of another 10 per cent. So I figure that 30 per cent of the cost of a house is pure taxes," he said. "If the government made the decision for bona fide real estate development to take off those taxes, it would bring the cost down towards affordable levels. I think this needs study."
The Jamaican Teas group develops property through H. Mahfood & Sons. Its first real estate project was the development of an 18-studio apartment complex constructed at Kingsway in Kingston, which sold off. The units were priced between J$9.5 million and J$11.5 million.
The company's second development of an 11-acre property, comprising 71 two-bedroom houses in Yallahs, commenced in 2015. In 2013, the company reportedly realised $21 million in operating profit from $185 million in sales from rental and development at Kingsway. In 2014, the real estate division reportedly returned a $2-million profit from $26 million in sales, and last year the business segment incurred a $9-million loss from $82 million in revenue.
Despite the frustrations, Mahfood remains optimistic about real estate in Jamaica . He wants to list the real estate arm in order to focus on that sector.
"I believe that there is a chance to make profits from real estate, but I believe that in terms of a mix between manufacturing and the real estate business that it's not a good fit," he said at the conference. "I think we will look at spinning the real estate business off shortly. It would involve issuing shares to the existing shareholders and listing it on the Jamaica Stock Exchange. We have not made any definite plans, but that is where we are going."
Jamaican Teas had initially indicated plans to list the real estate arm by the end of 2013 and raise up to $200 million from the initial public offering.