Banks have started implementing new policy measures requiring proceeds from disposal of immovable property valued at $50 000 or more to be paid in tranches.
The Reserve Bank of Zimbabwe (RBZ) measures meant to enhance foreign exchange monitoring, management and improving market liquidity remittance of sale proceeds from disposal of immovable property have, however, ruffled feathers on the property investment market.
The policy compels banks to pay sellers of immovable property in tranches after an initial $50 000 payment. Upon selling property worth over $50 000, the seller will no longer be paid the whole amount of the cost of the property, but an initial payment of $50 000 would be transferrable at once after all statutory deductions, and the remainder would be paid over one year.
In his Mid-Term Monetary Policy Statement Reserve Bank of Zimbabwe governor Gideon Gono said it was important that due to tight foreign exchange liquidity conditions in the domestic market exacerbated by absence of balance of payments (BOP) support, the Capital Account remained regulated.
Gono said the world over, the Capital Account was susceptible to shocks in the form of capital flight, adding that having studied the current negative implications of wholesale remittances on the BOP, offshore remittances arising from the disposal of immovable property shall require prior exchange control approval.
“In order to manage capital outflows which impact negatively on the BOP position and liquidity on the local market, remittances arising from disposal of immoveable property by residents shall be remittable in tranches over a one-year period,” reads part of the monetary policy.
Under the new regulations only permanent emigrants with approved formal emigration, deceased estates whose beneficiaries are resident outside Zimbabwe and individual foreigners with documentary proof of transferring funds into Zimbabwe for the purchase of immovable property, would be eligible to get 100% remittance of their sale proceeds at once.
Those eligible for remittance in tranches include Zimbabweans within and outside Zimbabwe.
The sale proceeds would be managed through a special account to be designated “FCA (Property)” (Foreign Currency Account).
For Zimbabweans outside the country, sale proceeds less or equal to $50 000, or its equivalent in other currencies, would be transferrable at once while a balance after remittance should be retained in the FCA (Property) for at least one year and interest earned shall be freely remittable each time it falls due. The principal amount shall be remitted in four equal tranches within the year.
For resident Zimbabweans sale proceeds less or equal to $50 000 shall be transferred at once from the FCA (Property) to an individual FCA while the balance may be used for the import of goods to be consumed locally as well as payment of services both locally and offshore.
The balance kept in the FCA may be withdrawn as cash or transferred to the individual FCA in four equal tranches within 12 months.
Estate Agent Council chairman Oswald Nyakunika said it was too early to assess the impact of the policy impact as it was in its early stages of implementation.
“There is really little to panic about. I think panic is always largely a product of little information or misinformation. The main concern was tranching, $50 000 and then the balance over a year. This only applies if sale proceeds are going to be remitted outside the country,” said Nyakunika.
“If the money is in the country you can spend it in the normal way just like your personal current account. The other concern was opening of FCA (Property) accounts. We are advised this is just a way of monitoring proceeds from sale and also to make sure it doesn’t get mixed up with your free funds.
Our only request to RBZ is that the processes be streamlined and be less cumbersome. The efficient operation of businesses demands that.”