Portugal’s real estate sector watches parliamentary plans to cut VAT from 23% to 6% on construction and rehab — a move aimed at lowering costs, increasing supply and improving affordability.
Portugal’s real estate market is on alert as parliament debates a package of fiscal measures designed to stimulate construction and rehabilitation, reduce production costs and help relieve pressure on housing prices and supply.
At the heart of the proposals is a potential VAT reduction on construction and renovation contracts — from the current 23% to 6%. Industry observers say such a change could materially lower development costs and create room for more new and rehabilitated homes to reach the market at prices closer to household demand.
Policy details tie access to the reduced rate to specific affordability rules. Properties benefiting from the tax cut would need to meet price caps for sale or maximum rent ceilings for lettings, signaling a targeted approach that prioritizes permanent and owner-occupied housing as well as more affordable rental options.
Promoters would also face tighter timing rules. To qualify for the tax advantage, completed projects must be placed on the market within a maximum period established by the legislation. This aims to prevent long-term stockpiling of units and ensure new supply quickly reaches buyers and renters.
Operationally, the draft provisions introduce a reverse charge VAT model for construction work. That shifts greater tax calculation and reporting responsibility onto developers, requiring careful financial planning and strict compliance with eligible conditions throughout the build process.
Reaction in the sector is cautiously optimistic. Many developers and investors welcome the potential for cost relief and increased market activity, but stress that practical impacts will hinge on the clarity of the legal framework, streamlined administrative procedures and close coordination with building permit and licensing systems — areas long cited as bottlenecks for housing delivery.
If well designed and implemented, the measures could help rebalance a market marked by persistent demand-supply imbalance, stimulate investment in construction and rehabilitation, and contribute to greater price stability over the medium term. Policymakers will need to balance incentives with safeguards to ensure that the benefits reach households in need of affordable and permanent housing.
For now, companies, buyers and renters are watching parliamentary debates closely. The final scope, eligibility rules and deadlines will determine whether the proposed fiscal changes are a decisive step toward a more sustainable, competitive and accessible Portuguese housing market.
