Golden Visa – Rehabilitation for affordable housing
By Miguel Silva Reichinger Pinto Correia No Comments
Last Updated on March 12, 2021 by Miguel Silva Reichinger Pinto Correia
In the last article I have mention that in 2021, it will be possible to observe an increasing trend in the betting on construction and rehabilitation of urban real estate, in order to accommodate the growing demand in the market for more affordable housing, specially pursued by young couples, who end up leaving their parents’ house at later stages than 40 or 50 years ago, and look for a new home closer to the best infrastructures, the jobs, the best socio-cultural activities and the best services, specifically health services and care.
Even with the news that BCE will maintain a monetary policy that will ease the resource to credit for habitation, keeping the interest rates stuck near at 0%, the fact is, we currently face the cold truth of one of the biggest economic crises in history, which impact, and duration will depend on the global measures taken by the several governments, in terms of supporting the sustainability of several economic sector, companies and specially jobs. This means, that even with low interest rates, the habitation on the bigger urban areas needs to make a change in order to be more affordable, more effective in terms of the usage of construction materials, and more sustainable.
This leads me to consider, in the scope of the Golden Visa procedure, that the bet on the investment in the value of 350.000 Euros, in real estate, whose construction has been concluded at least 30 years ago or located in an area of urban rehabilitation and execution of rehabilitation works of the acquired real estate, may be a good solution to advance towards the transformation of the housing market in urban centers, keeping a solid bet on the profitability of the investment.
In Portugal, whether in Lisbon, Porto or even Funchal, there are good opportunities for properties with the characteristics and requirements mentioned in the previous paragraph.
The fact that there are a good number of properties that can fulfil the above requirement, together with the fact that over the last 10 years we have seen the exponential growth of the area of urban rehabilitation of cities, as well as the intervention of new techniques of reconstruction, reconditioning, use of new and better materials and architectural solutions, create the perfect symbiosis for the bet in this market segment.
It is also important to mention that in Portugal there are tax benefits for the rehabilitation of real estate for residential purposes, and in addition to the tax benefits granted, which range from municipal tax exemptions, to reduced VAT rates for construction services, there are also, depending on each municipality, support and financing programs for the rehabilitation works on the acquired real estate.
These tax and non-tax benefits will be addressed in articles that I will publish in the future.
The Golden Visa program obliges the applicant to keep the real estate investment for a period of five years in its ownership, going through the two renewals of the temporary residency permit, until the applicant reaches the possibility of requesting for the permanent residency permit, but that does not prevent the applicant from using the investment in a profitable way, for example through renting.
Another form that is not ruled out, is the lease for a period of five or six years, with purchase option at the end of that period for a value determined from the beginning, ensuring that price for the future, or even leaving that value open to a possible market valorization of the property.
This way I believe it is possible to give the fullest mark of the term investment, to the Golden Visa, keeping the fulfillment of the obligation to retain ownership of the property during the period of five years.
The next step should be getting to know what material requirements are needed regarding the investment beside the minimum amount of the global investment.
Within the application procedure for obtaining a Golden Visa, the requirements that are necessary, regarding the real estate investment, beside that the global value needs to be equal or higher than 350.000 Euros, are:
- the construction of the acquired property must have been concluded at least 30 years ago or be located in an area of urban rehabilitation;
- rehabilitation works will have to be carried out on the real estate acquired;
The requirements mentioned above need to be proven at the time of the application for obtaining the Golden Visa by this investment route.
The way to prove the requirements in a) should be done either through documentation of the property’s land registry for the first part of that paragraph, or through a declaration of the Municipality attesting the location of the property in an urban rehabilitation area, concerning the second part of that paragraph.
A more complex issue will be the meaning and scope to be given to what is intended by the rehabilitation works that must be carried out.
Undoubtfully, some sort of rehabilitation work needs to be done in either case, but I don’t believe that the legislator had the intention to force a full rehabilitation of the property, but rather gave great latitude in the volume of works to be performed in order to be considered that the rehabilitation of the property has been carried out.
In the next article I shall provide a deeper analysis of what I deem to be considered rehabilitation work for the purposes of complying with the requirement mentioned in the point b) above.
Having said this, in the next article I will again address in general terms the requirements for the investment of 350 thousand Euros in real estate built more than 30 years ago, or in an area of urban rehabilitation, and focus more specifically on the interpretation that I believe to be more correct and balanced, regarding the interpretation of the obligation of rehabilitation works, and what will be the extension or volume of those works, which may vary according to the physical state of conservation in which the real estate is acquired.
auctor Pedro Marrana