Durban - Property developers have called on the eThekwini Municipality to offer a “three-year” grace period to developers and not charge the punitively high rates for vacant land, saying this is making it impossible to develop properties.
They argue that the rates on vacant land had increased significantly, describing the move as punitive and undermining investment in the City.
While it is understood that the large increase in vacant land rates was to discourage people from holding on to land, the business community said that the increase had resulted in many being unable to afford the rates.
This sentiment was shared by ratepayer organisations and an opposition party in the council after a developer raised the matter in an engagement between the City and the business community last week.
Speaking during the meeting last week with the mayor, Schalk Theunissen, development director at property developer Devmco, said the high rates on vacant land that were charged last year had undermined development.
He said the rates on vacant land meant that landowners could not develop properties.
“The suggestion is to change the definition of vacant land rates to allow a person a certain period between two and three years and give them an opportunity to develop … their properties and if they do not develop, change it to vacant land rate but at least if they do develop there are no punitive rates against them,” said Theunissen, adding that the impact of the rate increase in the past financial year had been immense.
He said, for example, if someone bought a R2 million property, to develop, for instance a house, the rates went up to R30 000 per month without the bond cost and the day they finished building the house, the rates dropped to R5 000.
“The City’s intention was to encourage people to develop and not hold on to land, but it has had the opposite effect.
“It is so punitive that people cannot develop and they do not want to buy pieces of land,” he said, adding that for developers it’s almost impossible to develop at those rates.
The increase last year caused an uproar, with one resident telling The Mercury that she viewed the increase as a penalty for not developing her land.
Ish Prahladh, chairperson for Reservoir Hills Ratepayers and Residents’ Association, said a number of factors must be considered in determining the rates charged for vacant land.
He said in cases where an owner had left the land for years without developing it, they should be penalised.
However, “land that is being used for development, which is being held up by town planning and other issues which the municipality is responsible for, should not be penalised (with vacant land rates) and should (pay rates) in comparison to houses being built on it”.
Asad Gaffar, chairperson of the Westville Ratepayers’ Association, said the rates on vacant land was equivalent to a money-making scheme by the City.
“This council is desperate to increase revenue and under normal circumstances that would be a good thing, but not when there is so much mismanagement.”
He said the decrease proposed in the draft budget was meaningless. “It’s not actually a decrease, vacant land was subjected to an insanely high tariff increase in the last budget. And there has been a lot of pushback (by residents against the increase in the previous financial year). The City is not doing anyone any favours.”
DA councillor Warren Burne said the proposed rates randage on vacant land for the 2023/2024 year was again iniquitous. He said the reduction from last year’s dramatically increased rates randage was insignificant relief to the owners of vacant land, who have been hammered since last year.
“The reason which I heard for the doubling of the rates randage on vacant land last year was that the municipality needed the additional revenue to balance the budget.
“It is a sad reflection of the state of the municipality’s finances, that it has to again propose the hammering of the poor owners of vacant land to balance the budget.”
He said the fact that the municipality had to hang on to most of last year’s increase to balance this year’s budget, is a reflection of the extent to which the city’s income streams from the sale of water and electricity were drying up.
He said the DA would argue strongly for a reduction of the rates randage for vacant land.
EThekwini Municipality chief financial officer Sandile Mnguni told the business community that the City would consider their suggestions.