Honduras: Overview

RENTAL YIELDS

Yields are high for beach area properties in Honduras

A 100 sq. m. house along the a Bay island beach can earn very healthy yields of perhaps 35%. The figure is calculated for weekly rentals and an estimated 3 months vacancy each year. Yields for other sized properties range from 12% to 21%, with bigger places earning generally lower yields.

Apartments in Honduras' capital and other major cities have much lower rental yields of around 4% to 6%; however, 300 sq. m. apartments might typically yield up to 8%. Houses in major cities' suburbs might typically yield from 6% to 8%.

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TAXES AND COSTS

Moderate taxes in Honduras

Effective Tax Rate on Rental Income
Monthly Income	US$1,500	US$6,000	US$12,000
Tax Rate	4.4%	3.1%	5.1%
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Source: Disclaimer

Rental Income: Net real estate rental income of non-residents is taxed at 10%.

Capital Gains: Capital gains of nonresidents earned within Honduras are taxed at a fixed rate of 30%.

Inheritance: Inheritances, gifts and donations are taxed at the income tax rates.

Residents: Income tax of residents is imposed at marginal rates. The first HNL70,000 (US$3,561) is exempt.

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BUYING GUIDE

Total transaction costs are moderate in Honduras

The total round-trip transactions costs are around 9.65% to 11.65%, inclusive of the 5% real estate agent’s fee, which is paid by the seller. The total cost of registering property is around 6.65% of the property value. The registration process involves seven procedures and can be completed in about 36 days.

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LANDLORD AND TENANT

Rental laws are pro-tenant in Honduras

Rent: The initial rents and rent increases are generally set freely by the parties. However, if the value of the property being rented is below US$2,000, it is the Rent Tribunal that sets the rent.

Tenant Eviction: The eviction procedure and collection of unpaid rent can take a long time. The time period to resolve a lawsuit of eviction in the Tenancy Tribunal is unpredictable, due to the ineffective legal system - all channels available to the tenant are typically used to delay the trial.

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ECONOMIC GROWTH

Honduras rising from the ashes?

In 1998, Honduras (pop. 7 million, GDP/Capita US$1,225) was devastated by Hurricane Mitch. At least 5,000 people were killed and 70% of the crops were destroyed. The damage, estimated at $3 billion, set development back by decades. Real GDP per capita is now back near its 1980 level.

The economy grew by about 4.2% in 2005 and 4.6% in 2004, and it is estimated that GDP will increase by 4.5% in 2006.

Honduran society is fractured by economic inequality. Money sent home by Hondurans working abroad is a key source of income. Malnutrition, poor housing and infant diseases are widespread. Poverty, and the prospects offered by drug trafficking, have contributed to a virulent crime wave, conducted by youth gangs known as “maras”.