Once the announcement by the Buenos Aires Government about the suspension of tax incentives promoted by the conversion plan microcenter For the projects that would be carried out in that area of the City, different business chambers and industry developers who had undertaken ventures real estate In those parts they spread their opinions on the matter. And although it is still unknown what will happen with these developments, many assure that the negative impact of this measure will be really great.
With 22 proposals presented, the suspension of the regulations stop all projects that were about to be launched, “without a doubt, something counterproductive, taking into account the delicate moment in terms of the activity of the sector,” highlights Carlos Spina, president of the Association of Housing Entrepreneurs (AEV), representing the board of directors.
The developments already started, committed by the City Government, “without the subsidy completely change the economic-financial equation“, says Damián Tabakman, president of the Chamber of Urban Developers of Argentina (CEDU). The issue will be “knowing under what format to renegotiate this suspended tax relief. We will see what the City offers.” Therefore, “each developer will negotiate it on their own and will draw their own conclusions.”
In contrast, other market players believe that The impact would only fall on a small group of companies more interested in taking advantage of tax benefits than in launching real estate projects. The truth is that, “in an area of low demand, subsidized supply does not contribute much to any transformation,” asserts Santiago Levrio, institutional director of Alianza Urbana. And, in any case, “the projects started have already absorbed the benefit,” he points out.
Microcenter without reconversion: the short-term consequences
Although the absence of foreign investments has a long history in the local real estate market, “non-compliance or the need to reformulate signed contracts is bad news in terms of showing what happens with contracts in the country in general and with the downtown, in particular. Because, in itself, we don’t have much of a reputation in that regard,” laments Tabakman.
Apparently, in this case “there are issues of force majeure linked to the significant fiscal effort in economic terms that this measure would entail, and based on that they are determined to renegotiate it, even if it is a signed contract that will be called into question,” adds the president of the CEDU.
There are 22 conversion projects already presented
In the absence of clear rules, the Uncertainty drives away foreign investors. In this case, “a law changed by a ministerial resolution is precisely the opposite of the desired scenario for the investor“, Spina agrees.
However, Levrio believes that this law “was not intended to improve the profitability of companies, but rather to promote the development of the downtown area, which will clearly have to wait.” In addition, no serious investor “speculates on temporary benefits provided by the public sector. Foreign investments are based on long-term schemes,” he says.
On the other hand, as this is a regulation that, at the time, was issued by law of the Buenos Aires Legislature, the result for some could be a radical affectation of legal security. “While it is suspended, it is more of a subjective question, especially if it is suspended it is not very long-term. And in this suspension period what they are telling us is that they are opening a space for renegotiation with each of the developers affected,” confides Tabakman.
The other side of the coin is that of those who claim that “this scheme of benefits aimed at a certain group of companies has always been questioned for its impact and scope.” Therefore, Talking about legal certainty for exclusive benefits intended for certain companies is an inaccurate use of the concept“, according to the institutional director of Alianza Urbana. In addition, this benefit was always “known to expire on January 31, 2024. It would have affected legal security to have extended it.”
What does the statement from the Buenos Aires Government say?
The plan to reconvert the center of the City of Buenos Aires ˗through a regulation approved on December 9, 2021˗ into a housing area was put on hold after being announced days ago in the Official Gazette.
The resolution “suspended the effects of the administrative acts of pre-approval and approval of reconversion projects within the framework of the regime provided for in Law No. 6508 and all procedures related to the granting or recognition of benefits within this framework,” the statement said.
The sector assures that the measure will have a strong impact
It was also reported that “a comprehensive re-evaluation of the projects will be carried out based on criteria that have to do with a greater geographic focus, the needs of the area and that generate greater private investment. And evaluate each case based on the criteria that are established.”
Specific, This plan provided tax benefits that had “a fiscal cost of about $215,000 million (…)” and is considered excessive by the current administrationwhich seeks to prioritize private majority participation”.
