12.12.2022
Rent increases and a shortage of apartments available for rent are a matter of course. The situation is not only unresolved, but worsens. This creates problems for locals, but also makes it difficult to attract foreigners, especially those with high incomes. How can we increase supply with the help of the private sector, which alone can help mitigate the problem?
Both the Land Development Organization and the various municipalities that are trying to make cheap rents by offering municipal units not only have limited supply capacity, but will soon run into problems both in allocating units and in managing them (i.e. possible evictions).
An example to be avoided is refugee housing estates, which, once the apartments are handed over to the beneficiaries, have huge compliance problems.
We recommend the following:
1) Implementation of a new scheme covering residential units/apartments for rent in new or existing units for such applications submitted before the end of 2023 and for new ones that can be built thereafter until 2027.
2) Projects for this purpose (lease) are eligible for an increase in building ratio of at least 20% of the prevailing areas and a reduction in the need for parking spaces up to 50%.
3) Premises built for rent are subject to 5% (instead of 19%) VAT on the cost of construction, provided that they are not sold for 10 years. The difference is refunded pro rata if sold during this period.
4) The so-called minimum rental areas should be reduced by 30% of the current requirements.
5) Units benefiting from these measures should not only be new projects, but also separate existing units, which will encourage private projects that can be realized through expansion.
6) Since there is enough land for new developments, we do not consider that there is a problem of lack of space / sites. With low interest rates on deposits and the absence of alternative investments, there is an opportunity to attract foreign investors.
7) In areas where the problem of deficit is particularly serious, in addition to the available incentives, tax incentives for five years (even a tax reduction of 30% depending on the deficit in the area) can be offered.
8) Student dormitories have not attracted investors due to the inaction of the authorities in helping (not in money), and various offers that are made from time to time (for example, the use of hotels, renting individual rooms, etc.) are a temporary solution.
The social problem of non-payment of general business expenses, which hinders the supply, is well known. Therefore, I recommend that new apartments for rent be released from the protection of the law with immediate eviction three months after the debt has arisen.
I hope that the future presidents of the republic will take these proposals seriously.
Anthony Loizou & Associates EPE – real estate appraisers and development project managers
