Construction sector to experience relief through enactment of revised tax regulations, as announced by Roman Sklar
In a recent press conference at the Government, Roman Sklyar, the First Deputy Prime Minister of Kazakhstan, announced the adoption of the new Tax Code, effective from 2025. This change will require large construction companies to pay a 16% VAT on housing sales, a tax benefit area that previously existed for some developers. However, the government has clarified that this change will not lead to an increase in housing prices, especially in the economy-class segment.
According to Sklyar's statement, the prices in the economy-class housing sector are already aligned with market rates, and the removal of tax benefits for developers is not expected to drive price growth. The government intends to continue regulating prices for affordable housing programs like "Baqytty Otbasy" and "Nauryz Zhumysker" in a market-driven way to protect lower-income citizens.
This shift away from special tax exemptions for developers with government oversight is aimed at eliminating practices such as business fragmentation and excessive profit extraction by large construction companies. The state's role as a buyer of housing from private builders, which has been in effect for about 10 years in Kazakhstan, has helped to prevent housing prices from being inflated, especially in the economy class segment.
The Vice-Premier also announced that over 19 million m2 of housing will be built this year. Despite the increase in tax obligations for construction firms, especially through VAT, this change is not expected to affect the pricing of economy-class housing or result in widespread price inflation on the housing market.
In summary, while the new Tax Code brings about changes for construction firms, the impact on economy-class housing pricing is expected to be minimal. The government's regulatory measures and the current pricing correctness in the economy-class housing sector will help to maintain affordable housing for lower-income citizens in Kazakhstan.
The government's regulatory measures in the real-estate sector, particularly the maintenance of affordable housing programs like "Baqytty Otbasy" and "Nauryz Zhumysker," aim to protect lower-income citizens from potential price increases due to the changes in the Tax Code. Construction companies involved in real-estate business are expected to invest their resources wisely, taking into account the new VAT requirements and the minimal impact on the pricing of economy-class housing.
