Luring investors back to the CBD.

Posted On Tuesday, 25 March 2003 02:00 Published by
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A new tax relief measure for inner city property owners will help to woo investors back to Johannesburg's CBD and ensure they stay there.

A new tax relief measure for inner city property owners will help to woo investors back to Johannesburg's CBD - and ensure they stay there, say property analysts.

Finance Minister Trevor Manuel announced the tax incentives, to be applied in city centres across South Africa, in his February Budget speech. The incentives have been praised by the property sector.

Owners who revamp their buildings will be able to claim a 20% tax cut of their upgrade costs from their income every year for five years. Owners who construct new commercial or residential developments will get a 20% write-off in the first year and 5% every year for the next 16 years.

Property economist Pauline Larson believes the incentives will make Johannesburg's inner city more attractive to investors, "especially those who are sceptical of investing in the inner city" and that it may stem the migration of existing business to the wealthier northern suburbs.

"Johannesburg's inner city has been through 10 years of a serious negative cycle," she says. "Now the question is how to turn the market. I think this incentive will contribute to that. The government is making it more cost-effective to invest in the city and there will be growth if investors come back," Larson says.

But while the incentives may succeed in selling the inner city to business again, they are not a quick fix to cure city centres of crime and grime, she says.

It is expected that legislation, which will state how the application process will work and the zones they will apply in, will be drawn up in October.

For now, the National Treasury has identified the designated areas as those with "developed urban transport infrastructure, high population carrying capacity, central CBDs and inner city environments".

Other metropolitan areas earmarked to receive the incentive include Ekurhuleni, Tshwane, eThekwini, Buffalo City, Durban, Polokwane and Mafikeng.

In its 2003 Budget Review, the Treasury states: "Many of South Africa's urban areas are experiencing inadequate infrastructure maintenance and environmental decay. For urban renewal to succeed, there has to be greater business investment in the regeneration of inner cities."

Marc Scheinder, a property analyst at research body e-prop, says the incentives are attractive and viable, but it is not certain whether they will warrant new investment in city centres.

"We still have to see how the whole process will work, but in principle initiatives like this are better than nothing. They offer a number of perks, which will interest investors.

"It's a clear incentive for those who have existing property in the CBDs, especially small and so-called incubator businesses. Now they can set up shop and can invest in their properties. Maybe they thought of relocating in the past and now they won't. Also, the cost of rentals is very competitive in the inner city."

He adds that the incentives are in line with a global move by governments to fix up urban centres using tax as the means.

Leila McKenna, the executive director of Propcom, the City of Johannesburg's property firm, says that the incentives are positive and Johannesburg as a whole stands to benefit "as it will bring greater investment to an area that is in decline."

Neil Fraser, the executive director of the Partnerships for Urban Regeneration, agrees. He regards the incentives as "an excellent move" that will boost investors' interest in the CBD.

Johannesburg News Agency

Publisher: Johannesburg News Agency
Source: Johannesburg News Agency

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