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How much would Uruguay lose if the promoted housing law were eliminated?

How much would Uruguay lose if the promoted housing law were eliminated?
How much would Uruguay lose if the promoted housing law were eliminated?

Politically, the elimination of the promoted housing law would require a complex legislative process and a thorough evaluation of its economic and social implications. It is crucial that actors involved in the real estate sector pay attention to political developments and candidates’ proposals ahead of the elections, since any change in this legislation could have significant consequences for the future of the real estate market in Uruguay.

Renting: the preference for the new

In Uruguay, young people, workers and students show a growing preference for renting new and brand new properties in various urban neighborhoods. This trend is transforming the real estate market, driving the construction of modern units that offer contemporary design, advanced technology and superior amenities. This change not only responds to aesthetic and comfort demands, but also revitalizes urban areas and promotes investment in quality housing in the long term.

Does the government build housing?

Governments, with the exception of construction for low-income sectors, rarely develop housing that enters the real estate market and actively contributes to national economic dynamism.

Governments have made considerable investments in the housing sector, especially focused on providing housing solutions for low-income sectors through specific programs. These initiatives do not usually have a direct impact on the conventional real estate market, since the homes built under these programs are mainly intended to cover urgent social needs, without entering the free market.

On the other hand, private developers, both local and foreign, have made a significant commitment to Uruguay and its real estate market. They have made considerable investments in the construction of new and modern homes, not only in Montevideo, but also in other important cities in the country. These investments not only contribute to increasing the housing supply, but also boost the local economy through job creation, investment in urban infrastructure and the revitalization of urban areas.

Taken together, both government investments directed at specific sectors and private investments in the real estate market play complementary roles in the housing and economic development of Uruguay, each with its particular focus on satisfying different needs and market dynamics.

Effects of modifying the Promoted Housing Law

Investments under the housing law promoted in Uruguay have been significant, with the construction of approximately 35 thousand homes and a total investment estimated at 3.5 billion dollars. In addition, it is highlighted that around 8,000 units have been acquired by Argentines, evidencing the attractiveness of the Uruguayan market for foreign investors. These and other data emerge from the report we published a few days ago, called “Investment and construction tsunami, housing promoted in Uruguay.”

The crucial question is whether the modification of the housing law promoted in its current terms would affect the continuity of these investments and the interest of local and foreign developers, as well as the sustained demand of Argentine investors.

A modification that reduces tax and financial benefits could discourage investment from local and foreign developers who depend on these incentives to make their projects viable. The resulting regulatory uncertainty could lead to a pause in new investments or a reassessment of development strategies. Furthermore, Argentine investors, attracted by the favorable conditions of the Uruguayan market, could lose interest if incentives such as tax and financial exemptions are eliminated, which could affect the frequency and volume of their property purchases in Uruguay. The sustainability The real estate market will depend critically on regulatory stability, fiscal predictability and market competitiveness, factors that will influence the ability to Uruguay to maintain its attractiveness as a long-term investment destination.

The genuine demand: the interior from the country

The continuity of the promoted housing law is crucial for the economic and housing development of the interior of Uruguay. This legislation has been fundamental in attracting investments to areas outside of Montevideo, stimulating the construction of new homes and energizing the local real estate market. Without it, there is a risk that growth will stagnate, since the fiscal and financial incentives provided by law have been decisive for developers and builders to commit to projects in cities and towns in the interior.

The promoted housing law has not only facilitated access to decent housing in less developed areas, but has also contributed to job creation and the strengthening of urban infrastructure in regions that have historically faced challenges in terms of investment and development. The elimination of these incentives could discourage investment in the interior of the country, limiting opportunities for economic and social growth for communities outside the capital.

It is essential to consider the positive impact that this law has had on the decentralization of urban development and in improving the quality of life of thousands of Uruguayans. Maintaining a stable and favorable regulatory framework is key to ensuring that the interior of the country continues to attract investments and experience sustained growth in the real estate market, benefiting both local residents and investors interested in diversifying their portfolios in Uruguay.

The real demand for housing is concentrated in the interior of the country, a region where construction activity has traditionally been limited compared to Montevideo. It is crucial to recognize that these areas represent considerable potential for the economic and social growth of Uruguay. Policies such as the promoted housing law have not only facilitated access to decent homes in less developed regions, but have also generated significant opportunities to improve local infrastructure and strengthen the regional economy. The continuity of these incentives is essential to ensure equitable and sustainable urban development that satisfies the expectations of growth and quality of life of the populations in the interior of the country.

Conclusions

As an expert in the Uruguayan real estate market, it is essential to evaluate the possible impact of the elimination of the housing law promoted after the October 2024 elections. This legislation has been fundamental for the sector by encouraging the construction of new homes through benefits fiscal and financial for both developers and buyers. It has contributed significantly to the increase in housing supply, stimulating economic activity and generating employment in construction. In addition, it has facilitated access to homeownership through tax exemptions and preferential financing conditions, especially benefiting middle-income sectors.

From an economic perspective, its removal could slow construction activity, reduce the supply of new homes and potentially increase acquisition costs, affecting affordability for buyers and the stability of the housing market. Socially, the law has promoted social inclusion by allowing more people to access decent housing, the elimination of which could negatively affect vulnerable groups. Politically, its elimination would require a complex legislative process and a thorough evaluation of its economic and social implications.

In summary, keeping the housing law promoted is crucial to sustain the positive dynamism of the real estate market, ensure accessibility to homeownership, and foster equitable and sustainable economic growth throughout the country. Its continuity will strengthen the local and regional economy, improve the quality of life of Uruguayan citizens and consolidate Uruguay as an attractive destination for investment in the real estate sector.

The housing law promoted is contemporary with the last 3 governments, generating multiple advantages for the country, for society and for workers. Far from eliminating it, it should be expanded, extending the tax benefits to 20 years, for those projects that are developed in the interior of the country, and allocate the homes for rent.

This possibility would create sources of work where it is most needed, the genuine demand for housing would be met, access to housing would be solved in cities where the sale of real estate is not further developed but renting is needed, and finally, and greatly Importantly, our country, with this proposal, would be in the headlines of the international press, since no country offers benefits for 20 years, attracting important business groups and investment funds to base their capital in Uruguay.

* Gonzalo Martínez Vargas is CEO of Moebius Real Estate Consulting.

Source: Ambito

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