They agreed that the proposed incentives could have a major influence in stimulating urban development and revitalising the CBD.

The incentives will cover costs incurred in the erection, extension or improvement of commercial and residential buildings, but not those of an industrial nature.

PE Regional Chamber of Commerce and Industry chief executive Alfred da Costa said the city, including the waterfront, offered unique opportunities for creating a cluster development that would involve residential, retail, office and leisure elements. The economy of the metro was in "a long-term up-turn".

The municipality was seeking economic and tourism growth at global standards, said Da Costa.

Irish property magnate Ken Denton said he suggested the issue of tax incentives to metro officials "a long time ago".

"I think it's a good idea. It will create a highly desirable zone. It has worked in Dublin, London and New York's Battery Park, which was also decaying," said Denton.

"It also gives financial institutions confidence to back up projects. It's definitely going to be a success."

Former property developer now turned estate agent Dimitri Zenios said the idea was "great" and would boost investor confidence.

He, however, said the issue should be tackled as a package, including factors like safety and security, parking and accessibility.

"It will enhance Port Elizabeth's CBD and encourage tourism. We want the CBD revitalised and businesses that have moved out must be brought back," said Zenios.

Pepi Silinga of the Coega Development Corporation said: "The development of the port will create a new axis for development and it will be in the interests of the CDC that an economically strong CBD and waterfront be developed."

The allowance is equal to 20% of the cost to the taxpayer of extensions or additions to existing buildings. This is tax deductible.

For new buildings, the amount of the allowance is equal to 50% of costs in each of the 16 succeeding years of assessment.

Mandela Bay Development Agency chief executive Pierre Voges said the main aim was to "get feet and interest back into the city".

The mandate area of the MBDA covers 1 039ha and within this area the urban development zone will comprise 250ha. "We have chosen the most derelict and decaying part of the MBDA's area of jurisdiction. In essence, it excludes the middle- and upper-class residential areas.

"The aim is to turn this area into a place where people can live, work and play again. All the types of development in this area should only be residential or commercial. We want to pull people back into the city," said Voges.

The area is bounded by the southern part of the harbour containing the tank farm and the manganese dump and stretches along Govan Mbeki Avenue to North End, part of Mount Croix, the whole Central area, the Baakens Valley and part of Humerail.

The inclusion of the southern part of the harbour - although the land is owned by the National Ports Authority - is based on the assumption that in due course this land will become available for non-industrial development by the private sector.

This will occur once the ore dumps and tank farm have been relocated to Coega.

The Donkin Reserve is excluded from the zone since it is a heritage site and cannot be developed.

The metro last week approved the MBDA's application to national treasury to have the area demarcated as a development zone.

The application was well supported by Percci and the CDC, who both wrote accompanying letters.

"Once the urban development zone is registered, anyone who buys and develops property in the zone will enjoy tax incentives forever," said Voges.

Cape Town and Johannesburg have already established their urban development zones.

The tax incentive benefit will be made available to owners as users of the building or as lessors, or to financiers of these investments.

The government will forgo about R1,3-billion in tax revenue by the introduction of these tax incentives.

The metro has to satisfy six conditions to have its application considered. The main condition is that the metro should also offer its own incentives alongside those of the government in the form of rates rebates.

Investors will be allowed low rates for a certain period.