Overview of real estate development:
In 2020, the number of real estate developers reached 3,181, but only 700 to 800 of them were engaged in ongoing activity. This disparity between the number of developers and the number of authorized housing units can be explained by the absence of a measure revoking developer status after a period of inactivity. In addition to the structural problems inherent in a declining sector, significant cyclical disruptions, particularly linked to a difficult macroeconomic context, have added to these challenges. Sales of new housing have been heavily impacted.
A sharp rise in construction costs:
Construction costs have been affected by several inflationary factors, including a significant rise in the prices of building materials such as “red products” (+84.5%), cement (+82.9%), and ceramic (+34.3%) over the period 2010–2020. In addition, labor costs, land prices, and interest rates have also contributed to doubling acquisition costs since 2010. The war in Ukraine in 2022 only deepened this inflationary situation.
Impact of real estate on GDP:
Although its contribution to GDP is limited, the real estate development sector continues to employ more than 500,000 people directly, and this number has been increasing since 2016. If we include indirect jobs in the roughly 300 trades linked to real estate development, the number of jobs generated by the sector increases considerably.
This sector remains important for the country, and a significant fiscal impact is collected from developers, given that the purchase and sale of housing are subject to several taxes (VAT, registration fees, etc.).
Difficulties buying housing for middle incomes:
Only 10.7% of households with an annual income above 60,000 TND can afford to purchase a 250,000 TND home on credit over a 20-year period.
With the money market rate and high loan repayments that increase the overall cost of housing, the average Tunisian faces difficulties first obtaining a loan and then repaying it.
Recommendations proposed by PWC:
In light of a study carried out by PWC, and in the context of a new push for economic growth, mainly in terms of growth and investment ratios while preserving public financial balance, the following recommendations were proposed:
- In the short term on the fiscal front, it is recommended to reduce the VAT rate on residential real estate from 13% to 7%, while canceling the planned increase to 19% starting in 2024.
- In the medium and long term, it is also recommended to reintroduce a fixed registration fee (25 TND per page) for all property sales carried out by developers.
- On the financial front, it is proposed to establish a fixed Housing Market Rate (TML):
An interest rate equal to the Money Market Rate (TMM) + 0.75% (not exceeding 7%) for citizens wishing to buy a home, with a subsidy mechanism using resources from the Social Housing Promotion Fund (FOPROLOS).