Tax breaks on Uruguay’s low-income apartment buildings are attracting Argentine investors

RIO DE JANEIRO, BRAZIL – It’s called Vivienda Promovida, and it’s designed to attract private investment through tax exemptions for builders, developers, and owners for 10 years.

More and more Argentines are deciding to invest in real estate in Uruguay. According to Uruguay’s National Registry Directorate, there are about 90,000 Argentine property owners in the country. In the last decade, an incentive program for contruction of residential buildings in Uruguay has also attracted the interest of local investors.

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The Vivienda Promovida program was launched in 2011 to facilitate access to housing – both buying and renting – for middle and lower-income groups. This program encourages private investment in housing through a 10-year tax exemption for builders, developers, and homeowners whose homes are for sale or rent.

Since the law was passed in October 2011, 1,017 projects for the construction of more than 25,000 homes have been submitted to the Investor Office of Uruguay’s National Housing Authority (ANV). To date, some 8,000 apartments have been built in Montevideo under this program in the city’s most central neighborhoods.

Strikingly, 1,200 of these properties (15%) were purchased by Argentine investors, according to a report by Uruguayan real estate company Moebius. This amount is equivalent to about US$125 million. “Argentine investors have purchased one or more apartments to rent in almost all of the buildings under construction, due to the tax exemption for subsidized housing, the square meter value, and the income generated by the units,” it says.

Real estate companies in Uruguay expect that Argentine buyers will increase due to confirmed transactions and inquiries. “The internal conditions in Argentina, such as the new rental law and the enormous inflation, are contributing to investors analyzing options for buying property in Montevideo,” Gonzalo MartÌnez Vargas, CEO of Moebius, told Infobae.

According to him, one can find properties in the Uruguayan capital at prices starting from $90,000 for a two-bedroom apartment that can generate rent of 6 percent. Or a two-bedroom apartment with a garage for US$115,000.

“We had two waves. First, Argentines with significant capital invested in up to 8 properties per building. We don’t see that anymore. And now, smaller investors who invest in one or two properties and are thinking about retirement or moving later,” MartÌnez Vargas added.

One of the benefits of the Vivienda Promovida program is the 10-year exemption from Uruguay’s 10.5% monthly rental tax. “The pandemic has not slowed down Argentine investment in Montevideo; reservations continue to be made. It is expected that the government’s planned opening of the borders through Uruguay in September could trigger a new wave of migration in search of capital protection and profitability,” Moebius said.

What is the profile of the Argentine investor? They prefer two-bedroom apartments with garages and rents above 4.5% per year. In general, they prefer central neighborhoods with tax exemptions, where the price per square meter is lower than in the coastal neighborhoods of Montevideo. In some cases, the price per square meter can even be less than US$1,000.

“Argentine women are the ones who most often call to get specific information and at the same time express their desire for real estate. They prefer to buy because of the lower prices and financing until they move into the property, especially since they do not have access to mortgage loans,” they explain.

Moebius defines the Argentine as a “middle-class investor with their own savings, looking for stability and confidence in the rental market.” To begin investing, one must have a bank account in Uruguay to purchase the property and then receive the rental payments.