To face the real estate market

The Cuban government has decided to reorganise the buying and selling of homes and the handing over of subsidies for the construction and repair of dwellings.

The authorities announced norms to reorganise the handing over of state subsidies for the construction and repair of dwellings.

With the approval of new regulations on subsidies to build and repair dwellings, the related tax-paying procedures and other initiatives, the government aims to reorganise and unblock an activity that has traditionally had a deficit in Cuba since the past.

Five years after the implementation of state aid with this aim, the Gaceta Oficial this week published a package of legal norms (two decree-laws, the same number of agreements by the Council of Ministers and 11 ministerial resolutions) to respond to a demand for these subsidies that surpass the current financial capacity of the State, in addition to presenting its intention to put a stop to illegal activities.

 

“There are more applications for subsidies than financing to grant them,” noted the daily Granma when reporting on statements by an official of the Permanent Commission for the Implementation and Development, Raquel Rodríguez Gato.

 

Because of this, the municipal administration councils, the local government structure, will now carry out a minimum of two annual calls for the reception of applications for this subsidy by the population. And the period to answer them is now 70 working days instead of 45, which is the norm in force.

 

The financing capacity to see to that demand comes from 60 per cent of the money collected based on the tax on the sale of construction materials. “The amount for that type of subsidy comes from what enters the budget annually,” Rodríguez Gato explained.

 

Linked to the tax collection activity, the Finances and Prices Ministry (MFP) also decided to apply a referential value that serves as the basis for the estimate of the tax applied to the buying and selling of homes and the donation of dwellings in the country, under the criterion that these operations have increased in the real estate market, but the illegal activities have also increased.

 

Among these regulations, the income policy director of the MFP, Vladimir Regueiro, listed the under-declaration of the values of transference or sale of homes on the market, the slowness in paying taxes, tax evasion and the masking of these activities with donations.

 

Law 113 of 2013, or Tax System Law, establishes the payment of a four per cent tax for the buying and selling operations or donation of homes. According to Regueiro, the treasury will take into account in the first instance the period agreed upon between the parties, “as long as that value of transference is the same or more than the established referential value.”

Close to 17,000 dwellings that are half built will be handed over to individuals who accept to assume on their own their conclusion.

 

The point has unleashed concerns and controversies. When defining these values of reference, the authorities declare as the objective guaranteeing that the estimate and payment of the taxes are close to the real values of the buying and selling between individuals. During a press conference, Regueiro insisted that it does constitute a legal value or price. But when establishing it, the State could regulate, at least indirectly, the real estate market, which since 2011, the date in which it was legally recognised, operated with supply and demand prices.

 

The elements taken into account by the authorities to establish the value of reference include the location of the home, the amount of rooms, having garages, parking spaces, construction typologies, type of roof, if it is a house or an apartment, urban planning facilities and importance of the settlements.

 

The government also approved regulations to make more efficient the evaluation of the economic solvency of the families applying for this subsidy.

 

From 2012 to 2016, the State has devoted more than 3.862 billion pesos to individuals to finance the construction, rehabilitation or maintenance of their homes. Out of this amount, the beneficiaries had executed 71 per cent at the close of last year, with a bit over 53,000 concluded construction actions.

 

In addition to the norms to reorganise the real estate legality, the government decided to hand over this time close to 16,887 dwellings whose construction, by state-run enterprises, are paralysed. The municipal governments will hand them over to individuals who accept finishing on their ownand those affected by climatic phenomena, those living in shelters and social cases must be given priority.

 

If the population agrees with this offer, the authorities will give an important boost to construction. After building 9,300 dwellings in 2016, the State has only planned to conclude 9,700 this year. (2017)

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