New Tax Reforms Promise Relief, Deepen Regulatory Clarity For Real Estate Sector

The new tax era, which will take effect in January 2026, is expected to deepen regulatory clarity, enhance compliance culture, and promise relief for the real estate sector.

This development also beckons regulators to expand access to decent housing for the citizenry.
While the reforms aim to boost revenue and align Nigeria’s tax system with global standards, property analysts warned that they could have far-reaching consequences for property ownership, housing affordability, and investment flows.

For now, the real estate sector stands at a crossroads between the promise of fiscal reform and the risk of over-taxation, of which the outcome will depend on how effectively the government, investors, and regulators balance revenue generation with the need to expand access to decent housing.

Although largely targeted at multinational and offshore entities, the effects will ripple through the real estate market. Many developers depend on foreign Special Purpose Vehicles (SPVs) to finance large projects. Under the new framework, these structures will face greater scrutiny from the Federal Inland Revenue Service (FIRS) and potential exposure to higher taxes.

The law compels multinational investors to disclose profits earned in Nigeria, reducing opportunities for income shifting offshore. While this enhances transparency, it could raise effective tax rates, prompting some investors to rethink their exposure or restructure financing to stay competitive.
The reform also tightens the Capital Gains Tax (CGT) framework, ensuring that any disposal of land, buildings, or shares in property-holding companies attracts CGT on actual gains. Previously, developers sidestepped this by selling company shares instead of the underlying properties.

Some experts see this as a fairer system that closes loopholes. Others worry it could discourage investment, especially in the high-end and commercial segments where margins are already strained by inflation and rising construction costs.

Reacting to this development, the chief executive officer (CEO) of Northcourt, Ayo Ibaru, described the exemption of residential properties from VAT as a welcome development, adding that, ‘it will help reduce development costs and ease financial pressure on developers. However, it’s unlikely to lead to a significant reduction in housing prices.’

According to him, “lower transaction costs on leasing could encourage more activity in both residential and commercial markets. The broader scope of recoverable input VAT, now covering services and fixed assets incurred for taxable supplies, also benefits developers.”

He explained that developers can recover VAT paid on construction materials and professional services. The exemption of capital gains on the sale of personal residential property, he said, will further stimulate investment by reducing the tax burden on property sales.

VAT exemptions on dividends distributed by REITs could also improve investor returns, attract more capital and reinforce transparency. Ibaru urged the government to introduce targeted tax incentives for developers focusing on green and affordable housing, such as tax credits and faster approval processes.

He also welcomed new rent relief allowances for individuals, which replace consolidated and personal reliefs. “Combined with zero per cent VAT on essential goods and services, these measures could marginally improve household disposable income and support housing affordability,” he said.

Similarly, the president of Proptech Nigeria, Dr Roland Igbinoba, said the Act will reshape the cost of property development and the entire real estate ecosystem. For foreign investors, the Act recognises double tax treaties with certain countries. For REITs, this is a game changer, he said.

‘However, CGT has moved from 10 per cent to 30 per cent. There are optimisation windows for REITs and SEC-regulated transactions, but developers must seek professional guidance,’ he stated.

He added that the reforms are designed to increase government revenue and create an efficient, globally aligned tax system. If properly implemented, they can bolster housing delivery as long as developers and financiers understand how to navigate them, Igbinoba said.

According to him, while rental income from residential and commercial real estate remains exempt from VAT, the law now allows input VAT claims on all purchases, including services and fixed assets. This, he said, will improve cost recovery for serious players.