Buying or Building Your First Home

February 23, 2017

Buying a plot of land and building a house on it is a dream for many of us. While the Housing Authority of Fiji is mandated to provide affordable housing for the working class in Fiji, the demand far exceeds supply by as much as 4 times. This leads to home and land buyers searching outside and ending up with private developers who are more likely to charge very high prices.

Land is the only asset that appreciates in value, as evidenced by the ever-increasing real estate prices, so much so that owning a land and home is almost an unattainable dream without Government’s assistance.

The Government has in recent years implemented policies that will help more Fijians get a place they can call home. One such policy is the refund for VAT paid on purchase or construction of the first family home. This applies to first time home buyers, whether they bought a readymade house or buy land and build.

The VAT Decree 1991 effectuates a tax on spending that is to be borne by the final consumer of goods and services. It is this law that has a bearing on the final price of an item purchased by the consumer as it is added to the normal price, making it a little higher.

Without Government policy for first home buyers, VAT on purchased land and building materials would be an additional cost, thereby reducing the power or ability of ordinary consumers to own a home for themselves.

If consumers are ready to buy a piece of land to build their first home, it is advisable to be very cautious and thorough.

What should consumers consider when buying or building a home for which they intend to claim VAT refund?

When buying land, it is important to verify whether the seller is charging VAT. If yes, check with the Fiji Revenue and Customs Authority if the seller is registered for VAT.

Likewise, for houses built by construction contractors who charge VAT on their services. Consumers need to ensure that they are registered for VAT, or they may not be able to claim refund on the VAT paid.

Again, consumers must buy building materials from traders registered for VAT, as they may not be able to claim for refund if they buy from a trader that is not registered and/or does not declare VAT.

It is equally important to keep original invoices when buying building materials. VAT claims will need to be submitted with original receipts. Considering receipts fade away, it is better for consumers to take pictures of the receipt on their mobile phones or scan and keep them electronically.

Village dwellers too can claim refund for VAT paid on the construction of their homes, provided they are able to verify:

  • Through the confirmation of the ‘ turaga ni koro ‘, that the house is completed and that it is the applicant’s first home; and
  • Through the confirmation of the Provincial Administrator, that the applicant is indeed a member of the ‘Mataqali’.

The Council has handled several cases where consumers have faced problems while buying properties. For example:

  • Fraudsters taking money promising land, but not delivering. A popular case is in Court against Mukesh Naidu who swindled consumers’ money. The Council received 18 complaints worth $65,000 against Mukesh Naidu. He is alleged to have taken deposits with the promise of allotting land, which he failed to provide.
  • Contractor started work without getting the approval of house plan. Consumers’ need to be aware of the local authority’s (or Municipal Council) Building Codes, and that their plans must be assessed and approved by the authorised engineers or by the Rural Local Authority if they are residing outside Municipal Council boundaries. The Council received a complaint from a consumer who had arranged for the construction of his house to be financed by Housing Authority for $95,000. When the building was up to the roof, the engineer did not approve because another beam was needed.
  • Consumer bought a land from the Housing Authority where all arrears to the Municipal Council was passed to him through unfair contact term in the Sales and Purchase Agreement. Consumers need to be aware that when buying a property, all the arrears owing for the property will be transferred to the new owners. Hence, the need to be vigilant when signing Sales and Purchase Agreement.

These sorts of issues can turn a sweet dream of owning a home into a nightmare. That is why it is imperative to seek the necessary advice from the appropriate authorities before putting your hard earned money into work that could leave you disappointed and out of pocket.

Aggrieved consumers can call the National Consumer Helpline toll-free number 155 to lodge any complaints against traders and service providers.