18 October 2004
The National Treasury has launched an urban renewal tax incentive to encourage the refurbishment and construction of commercial and residential properties in South Africa’s 16 major cities.
The incentive translates into considerable financial benefits for investors, especially for refurbishing existing buildings. Companies that redevelop buildings in the country’s inner cities will get a 20% tax deduction from all income earned in the first five years after a building has been refurbished.
Companies that develop new buildings will get a 20% tax deduction in the first year the building earns an income, plus an annual depreciation of 5% for the next 16 years.
This incentive supports other initiatives, such as policies to write off existing bad debt from inner city buildings in order to allow for these buildings to be sold, restored and refurbished.
The incentive will also encourage investment in affordable inner city rental housing, as well as provides a catalyst for public-private partnerships in mixed-used developments that provide social facilities integrated into new commercial and residential developments.
The incentive scheme will eventually apply to developments undertaken in 16 identified municipalities:
- Buffalo City (East London), Eastern Cape
- Cape Town, Western Cape
- Ekurhuleni (East Rand), Gauteng
- Emalahleni (Witbank), Mpumalanga
- Emfuleni (Vaal Triangle), Free State
- eThekwini (Durban), KwaZulu-Natal
- Johannesburg, Gauteng
- Mafikeng, North West
- Mangaung (Bloemfontein), Free State
- Matjhabeng (Welkom), Free State
- Mbombela (Nelspruit), Mpumalanga
- Msunduzi (Pietermaritzburg), KwaZulu-Natal
- Nelson Mandela (Port Elizabeth), East London
- Polokwane (Pietersburg), Limpopo
- Sol Plaatje (Kimberley), Northern Cape
- Tshwane (Pretoria), Gauteng
The Johannesburg and Cape Town incentive scheme took effect from 14 October, with the Durban scheme expected to be gazetted by the end of 2004.
The Treasury has also already received applications for the scheme from the Tshwane, Emfuleni, and Sol Plaatje municipalities.
Johannesburg’s approved urban development zones include the central business district, Newtown and Braamfontein, as well as the high-density high-rise residential areas of Hillbrow and Berea.
Other lower-density residential areas surrounding Johannesburg’s Ellis Park area, such as Bertrams, Judith’s Paarl, Doornfontein and Troyeville, as well as Bellevue, Bellevue East and Yeoville, are also included. The manufacturing and industrial strip to the north of the M2 East/West, from Benrose in the east to City West in the west, also fall under the city’s approved urban development zones.
Cape Town has two urban development zones. Most of the historic Cape Town central business district is included, as are properties adjacent to the Main Road and Klipfontein Road Corridors. This includes portions of the suburbs of Salt River, Woodstock, Observatoy, Maitland, Mowbray, Athlone and Gatesville.
Cape Town’s second urban development zone includes the older part of the Bellville central business district, focusing on land adjacent to the Voortrekker Road Corridor and around Bellville Station. Some properties along Modderdam Road and Kasselsvlei Road are also included.
The proposed urban development zone for eThekwini/Durban includes parts of Walter Gilbert Road, Bell Road, Shepstone Road, Bay Terrace, Victoria Embankment, Alexandra, Brook Streets, West Street, Berea Road, Carters Ave, Canongate Road, Warwick Ave, Centenary Road, Carlisle Road, First Ave, Stamford Hill Road, Croydon Road. Walter Gilbert Road, Cobham Road, Old Fort Road, NMR Ave, Somtseu Ave, Stanger Str, Argyle Road, and NMR Ave until Walter Gilbert Rd.