Executive sits down with Namir Cortas, a founder of Estates Property Development and Investment, as well as president of the recently-formed Real Estate Developers Association of Lebanon (REDAL), to talk taxes, regulation and corruption.
Why was REDAL created?
We created an association that aims at pooling the major developers in an effort to better communicate our role to various governmental and other economic parties, as well as the public at large.
What’s your take on new tax proposals?
We suffer more indirect taxes, I believe, than any other sector.
Stamp fees, registration fees, permits. When we have archeological inspections to go through, we foot the whole bill. We suffer V.A.T. on construction. We don’t recover it. [In a project my company is working on, indirect taxes] will account for 30 to 35 percent of the overall project cost.
Is getting all of the paperwork in order to start a project complicated?
Yes. We go through municipalities. We go through the urban planning bodies, including the central one. We go through several other paths from the department of electricity, to EDL, to other services. It really should be one. At least there should be some coordination body where you know what you need to do and how to get it done. All of these procedures, instead of getting simpler, are getting more complicated. The world is going digital, but the government is not. Not in terms of construction permits.
So how long does it take and what do you have to do to get a construction permit?
Essentially there should be two [bodies to deal with]: There should be the municipality and there should be, in some instances, at least where big projects are involved urban planning. To go to either, you go through the Order of Engineers. If you’re developing downtown, in the area controlled by Solidere, you have to go through Solidere as well. Then you have [even more offices to visit] … These [procedures] are not only costly, they’re complicated and they create uncertainty in terms of timeframes. For instance, it’s such a bureaucratic process — I must have been involved in 15 projects, maybe more, since I’ve come back, and I don’t think there has been one where I haven’t learned a new turn … I haven’t seen anyone who defends the system. Not the mayor of Beirut, not the head of the Directorate General of Urbanism, not the head of the order of engineers.
What’s the solution?
We need one body. One body to go to.
In terms of monitoring construction, are there enough state inspectors to make sure projects are being built safely and in line with the laws on the books?
I truly believe the quality of construction has improved. It has certainly improved in the up-market sector.
Is that because of a private sector initiative or because of more inspectors or better inspection?
I think it’s unrelated to codes, at least to Lebanese law codes. I think it happened because the reconstruction of Beirut was led by the Solidere effort, and I think you could notice in the 1990s how buildings around Solidere, [in some areas] started looking better … in terms of quality of construction. Also, there are more professional developers now.
But has there been improvement in inspection and monitoring?
The government is doing its part. They are now insisting that … [developers] employ something called Bureau de Controle. For fire safety, for such issues, it’s a review of design and implementation but I believe the private sector has a bigger role. Yes the laws are there on all levels … But, to be honest, I don’t see a deterioration in the quality of construction. I see a proliferation, in some parts, in middle-income developments, that are substandard in some aspects. I don’t find it dangerous, but I find waterproofing to be of terrible quality, [for example].
While the government may be doing its job on that front, planning is still a problem in that no one seems to be doing it. Is it too late for urban planning?
I used to think it was … There are efforts on the part of some of the municipalities to tackle these things, and it’s working. But even they have to go through other bodies, and it’s taking a long time.
Are you pushing legislative fixes for any of the issues you have with the sector?
Legislation is very important for many things, and we’re finding, for instance, in the fees and tax issues, that it’s more to do with legislation than with policy and policymakers. But I personally believe that, in general, the problem with development in this country, or from the government side, is that the laws are archaic and I think we need more planning than regulation … I don’t think laws can replace planning. And I think that you can criticize Solidere for many things, but there are things that a master planner can do which laws cannot. We need to address these urban disasters and deal with them. And we have to develop around the villages and not destroy the villages themselves.
How do we weed out corruption?
In the last two years, it’s gotten pretty bad. It’s always been, you know. But it’s gotten worse because the economy has weakened, I suppose and because governance has gone to new lows. I do not know where to begin in addressing these issues … From my experience, the corruption does not help you pay less than what is fair [in taxes and fees] … My solution is simply the process. Create one assessment body for all properties and somebody or some committee to appeal to in case there’s something wrong. You can’t deal with 15 bodies when you don’t know why and who and how … I can’t see why it is so hard. I would say simplify the process and find a more objective way of measuring the fees. And look a little more long-term-ish as lawmakers, in terms of understanding the implications of the laws you create and of how simplifying these laws and these measures [can help] … I don’t think the solution is so much for us to fight it as much as it is to continually remind them and say, “Let’s talk about making it all fairer, making it all simpler.” We’re not saying we don’t want to pay. The system is organized enough that nobody can escape paying, no matter what the impression is. We don’t bribe our way and pay less. We ease the documents process because one has to, but that’s besides the real problem.