RO Govt. decision to keep VAT rate for more expensive apartments stirs controversy

The Romanian Government's decision to defer lifting the threshold for the 5% preferential VAT rate for homes has stirred criticism from disappointed developers.

The Government decided to postpone raising the upper limit for the price of houses subject to preferential VAT rate, from some EUR 93,000 to EUR 140,000, by an emergency ordinance on December 30. It remains unclear whether the higher limit will apply as of 2022.

Some developers claim that they designed their projects in line with the new limit, already approved by the Parliament late last year. They claim the Government's decision has dramatic results - buyers losing their front payments and investors failing to sell their apartments.

"As foreign investors, we are Romania's greatest ambassadors. Now, the Romanian Government stabs us in the back, which cannot be in Romania's interest," Belgian investor Didier Balcaen told Economica.net.

Balcaen is the general manager of Speedwell, which has a consistent portfolio of ongoing projects on the local market. The company will start constructing a project with 800 apartments in Bucharest's Baneasa area and should deliver the first 228 apartments next summer.

Meanwhile, local businessman Dragos Dragoteanu - the owner of local real estate agency Euroest Invest - argues that the Government's decision is actually good. The developers will eventually accept a smaller profit margin, he implies.

The developers will get margins of "only" 15-20% this time and not face bankruptcy, instead 25-30% typical profit margins, Dragoteanu said in an opinion piece published by Ziarul Financiar.

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