UAE developers weigh VAT cost on construction

Dubai’s developers will have to work out ways to handle the VAT (value-added tax) on contractors during a project development phase. This could even have an impact on how developers end up pricing their property values, an industry source said.

As such, residential off-plan sales have been exempt from any VAT, but any future inflation in construction costs could tell on sales prices.

Based on developer feedback, project costs typically average around 55-60 per cent of a development, from land acquisition to designing and then on to finally handing over the keys to the property’s owner. Now, if a contractor passes on his VAT related costs on to the developer, I assume that it will end up having a 2.5 per cent impact on a developer’s selling price.

It may not seem much, but property buyers in Dubai are turning increasingly price-sensitive. Any sudden spike in launch prices — however small — could tell on demand. More so, as there would still a lot of inventory that carry pre-VAT price tags. Link