Expectations are dropping among investors and real estate officials about the impact the government's recently announced incentives will have on the construction sector. Some in the business are even calling on the government to change the measures before they are voted on by lawmakers on the grounds that they will have little, or no impact, on building activity and are more trouble than they are worth.
The Hellenic Property Federation (POMIDA) wants the government to cancel plans to offer discounts offered to property owners for renovation work completed, saying that the benefit on offer is very small and mostly relates to high-income individuals.
POMIDA had proposed this measure to the government but in a different form. Based on its proposal, the benefit to property owners would amount to 40 to 50 percent of the amount being spent on renovations. This would be provided to investors in the form of tax credits that they could use to offset future obligations to the state.
However, the plan that has been put together offers investors a reduction in their taxable income, in what translates into a much smaller final benefit.
Problems have also appeared in regards to the other growth measure introduced by the government: a three-year freeze on a 24 percent VAT imposed on new buildings. If this measure relates solely to new buildings permits issued as of 2020 (until the end of 2022) then this will weigh heavily on tens of thousands of properties built before this period.
Also, this incentive may result in developers rushing out to buy land plots, in a move that will push land prices sharply higher in a short period of time. This is turn will increase costs for developers, resulting in highly-priced buildings that the market may not be able to absorb.
Consequently, construction companies may end up being stuck with buildings that were costly to build and too expensive to sell, while the state has lost out on VAT revenues for those three years.