Bahamas Developers Association Meets with DPM, Issues Resolved to Clear $1 Billion+ on Drawing Boards
With more than $1 billion in real estate development pending from Abaco to Exuma and concerns about recent changes in tax policy, the newly-formed Bahamas Developers Association met this week with Deputy Prime Minister and Minister of Finance Peter Turnquest.
“There was a grave concern among developers about a change in the ability to claim back costs on VAT returns when the budget that took effect July 1 was announced,” said a spokesperson. “It was a right every other business had and suddenly developers and builders were deprived of that. The change created immediate alarm and threatened to impact construction jobs, real estate and investment. Given that there is such a small profit margin in development, a sudden increase of 12% with the elimination of credits for material outlay was enough to bring sections of the industry to a grinding halt. We had been seeking a meeting to try to resolve the issue so some of the projects that were on hold and others that were considering scaling back could move forward. We got that meeting on September 27 and it went well. We now await specifics and timelines.”
According to the organisation’s statement, Deputy Prime Minister and Minister of Finance Peter Turnquest and Financial Secretary Marlon Johnson agreed to amend the wording, which they said was an ‘inadvertent accidental oversight.’
“It is not in our interest to stand in the way of your success,” Turnquest, who was Acting Prime Minister at the time of the meeting, told developers and real estate professionals. “We look forward to a good and harmonious relationship. You have my commitment and the commitment of my government to do whatever is in our power to encourage you. We recognize and appreciate the significant role you play in the economy of The Bahamas.”
While the meeting with developers was not until late September, the DPM had acknowledged concerns and maintained contact throughout the summer, a fact that the association said provided temporary comfort, but it was not until the face-to-face with representatives of some of the largest projects in the country took place that developers breathed a collective sigh of relief. Among those in attendance were representatives or principals of Albany, Arawak Homes, Sterling Hurricane Hole and Sterling Global Developments, Aristo (ONE Cable Beach, Balmoral and THIRTY SIX), Palm Cay, Baker’s Bay, Passerine at Abaco Holdings, Starfish Construction, Children’s Bay Cay and Williams Cay, Exuma, two attorneys and a real estate accounting specialist.
Christine Wallace-Whitfield, President of the Bahamas Real Estate Association, and Heather Peterson, a member of the BREA board, also participated. Together, their existing projects totaled well over $1 billion and for some, the value of development was in the multi-billions.
“My technical team and I stand by to assist and you will be pleased to know that we are making changes in the DIR (Department of Inland Revenue) to expedite and facilitate payment of the VAT credits which you are due,” the DPM assured industry reps.
“All we were asking for was the same thing every business has, the right to claim back costs on VAT returns. Without that, costs would soar so high that some projects underway would have been in jeopardy for completion. New projects were put on hold or sent back to the drawing table for reconsideration,” said the spokesman. “It was like a tsunami of development costs coming in on a tide of trouble so we are greatly relieved that resolution was achieved and the industry can move forward but we do need confirmation of processes along with the welcome assurances of remedy.”
The wording of the July 1 budget denied the right of builders and developers to include the cost of construction on VAT returns. That, along with long delays in VAT credits that some were experiencing, including one Bahamian condo developer who was owed millions, had thrown the industry into a tailspin and prompted the creation of an association to represent what had been individual and competitive entities. The group met several times over the summer.
The positive meeting cleared the way for Palm Cay, which had put its $100 million One Marina project on hold pending resolution of the VAT implications. A date for that groundbreaking is expected to be announced shortly. And a Bahamian developer who has held off on a high end mixed-use project on 12 acres said the resolution of VAT-related matters on development “revived enthusiasm” about those plans. That project, he said, would create several hundred construction jobs and be a boost to the economy for several years.
Developers, attorneys and real estate professionals offered to assist government going forward to make information available at the time of transaction closings about Real Property Tax obligations.