Tuesday, March 18, 2008
By Chibaula Silwamba
Tuesday March 18, 2008 [03:00]
FINANCE Building Society chief executive officer Srinivasa Krishnamurthy has said with the tax incentive on mortgage, low inflation and falling interest rates, it is now most appropriate to buy or construct houses. And Finance Building Society deputy chief executive officer Abha Chaturvedi said any country’s economic improvement can be seen in the development of the housing sector.
In an interview, Krishnamurthy said what the government had done to introduce an incentive on mortgage was the first step to reducing the cost of building or purchase houses.
Krishnamurthy observed that the incentive would help reduce the high number of people and families that do not have decent houses, estimated at 1.2 million.
“We have been making demands since 1996 that interest of mortgages should be deductable for tax purposes and in 2004 we also made the demand. Before 1994 that incentive was there but it was removed and now it has been restored.
That is a very big incentive and we are very happy,” Krishnamurthy said. “What this incentive does is that it allows a person to borrow more; if the mortgage interest is taken out of his taxable income then he pays less tax. It affords people to service bigger loans.”
He observed that many countries in the world had incentives for home loans.
“If you don’t buy a house today the cost of building materials might go up, inflation might go up, borrowing costs go up; anything might happen,” Krishnamurthy said. “At the moment inflation is low, there is concession on mortgage, interest rates are falling substantially, and therefore this is the most appropriate time for any individual to buy a house or construct a house.”
The government, in the 2008 national budget, made mortgage interest allowable for tax purposes for Zambian individuals who obtain loans for construction or purchase residential property.
And Chaturvedi said Finance Building Society’s lowest amount of loan has been K7 million and the highest K800 million.
“But it will take some time for every Zambian to have a decent house, it can’t happen overnight, but we are very determined in our goals,” she said.