Is the solar tax incentive worth it? We do the math

Article summary

• A new tax incentive allows homeowners to claim 25% of the cost of a solar system installation, up to a maximum of R15 000.
• The tax rebate will only be available for a year, so homeowners need to act quickly.
• Many banks will provide funding for a solar system when home buyers apply for a bond. The amount varies from one bank to another.

As Eskom loadshedding plunges the country into chaos, South Africans look for ways to mitigate the issue, and one of the recourses available to them is renewable energy.

When people think of renewable energy, they think solar, but many are put off by the cost of installing solar panels in their homes. However, new tax incentives might make solar power a more realistic option for many homeowners.

Tax rebate for solar panels

The 2023 Budget Speech revealed plans by Minister of Finance Enoch Godongwana to introduce a tax incentive for the installation of rooftop solar panels. The key points were:

• As of 1 March 2023, individuals who install solar panels will be able to claim a rebate of 25% of the cost of the panels.
• Costs can be reclaimed up to a maximum of R15 000.
• The rebate is only available for one year and can be used to reduce tax liability in the 2023/24 tax year.

Another option: A loan from your bank

Many banks are doing their part by providing funding for solar panel installation in addition to financing a home purchase.

How much the bank will pay and when they will pay it varies between banks.

• Percentage of the property value: Some banks provide a percentage of the property value as a loan for solar installation, with a minimum and maximum loan amount.
• Loan-to-value ratio: The LTV ratio compares the amount of the mortgage to the appraised value of the property. For some banks, this value determines how much will be granted for solar panel installation.
• Solar quote required: Some banks will require a solar quote to be presented while others won’t.
• Access to funds: Banks vary as to when they will make the funds for the solar installation available.

A rundown of the different banks and what they offer

First National Bank	RMB Private Bank	Standard Bank	Nedbank	ABSA
Loan limited to 15% of property value. Minimum loan of R50k	Loan limited to 15% of property value. Minimum loan of R50k	70% of funds can be paid to a solar installer	An increase to your home loan installments that will be offset by the reduction in electricity costs	An increase to your home loan installments that will be offset by the reduction in electricity costs
For LTV loans > 100%, maximum loan is R200k	For LTV loans > 100%, maximum loan is R200k
Solar quote not required, only estimated cost	Solar quote not required, only estimated cost	Solar quote required	Solar quote required	Solar quote required
Funds can be accessed on bond registration	Funds can be accessed on bond registration	Funds provided at bond registration	Funds will be paid once the solar installation is complete	Funds will be paid once the solar installation is complete

How much will solar installation cost

The average cost for solar panels in South Africa:

• R2500 for a 345W solar panel.
• R4500 for a 540W solar panel.

How many solar panels you need to install depends on the size of your home and your electricity usage per month.

Handymanhomes.co.za provides the following estimate:

Electricity cost per month	System size required	Estimated cost, including VAT
Below R1 300	2kW	R63 000
R1 300 — R2 200	3kW	R74 000
R2 200 — R5 000	5kW	R110 000
Over R5 000	10kW	R188 000

 

Of course, the solar system doesn’t need to cover 100% of the home’s energy consumption. Even just 10 solar panels could save on energy costs, and combined with an inverter, provide a large degree of independence from the grid.

Find out more about solar installation loans

Email us at solar@ooba.co.za to get a solar quotation for your home loan application.

For more information, you can contact our call center at 0860 00 66 22, or discuss with an ooba Home Loans consultant.