Government is sweeping aside bureaucratic restrictions to its tax incentives for inner-city rehabilitation.

It will almost certainly fire up the revival of blighted areas. 

The necessary changes to the legislation are making their way through parliament. 

The changes come after pressure from Frank Gormley, head of listed Irish company Howard Holdings, which is the biggest foreign investor in SA's inner cities.

Howard Holdings has many years of experience in inner-city revival in Ireland and Britain.

Its subsidiary, Eurocape, is developing Cape Town's biggest inner-city project, Mandela Rhodes Square. 

Gormley has been eager to expand business to Johannesburg, but has complained to the FM a number of times that tax incentives are too restrictive. 

Until now, section 13 of Act 58 of 1962, promulgated in 2003, allowed developers of new or renovated buildings in designated urban development zones to write off all renovation costs against income over five years, or new building costs over 16 years.

Government effectively contributes between 25% and 40% of an inner city's building costs through tax write-offs. 

However, only developers who keep their properties as investments can claim the rebates.

They do not qualify if they sell the property; nor do their buyers.

Buyers of sectional title units don't qualify either. 

But changes tucked into the Draft Revenue Laws Amendment Bill going through parliament will remove the restriction and allow developers who sell and their buyers to claim rebates.

They will also allow sectional title unit owners to claim 55% of the purchase price of a new building as a deemed cost for tax rebate, or 30% of a renovated property. 

For instance, the buyer of an R800 000 flat in a converted inner-city office building will be able to write off R240 000 of the purchase price against his income at R48 000 - or 20% - a year.

If his marginal tax rate is 40%, he will pay about R20 000 less tax each year, a total of R196 000 over the five years.

If the property produces an initial net income of R60 000/year, the effective yield improves from 7% to 10%. 

The new rebates will apply only to properties bought from November 8 this year.

Sectional title buyers will be able to claim only the deemed costs and not additional renovation they effect , unless their units are 1 000 m² or bigger. 

"But it's a great step forward and will broaden demand by an important sector of the market," says inner-city improvement consultant Neil Fraser.