Inner city development offers tax incentives for buyers

Inner city development offers tax incentives for buyers

Artist’s impression of Castle Rock, a new development nearing completion in Zonnebloem, Cape Town.

An almost completed luxury development in Cape Town’s suburb of Zonnebloem is offering investors an opportunity to own property in the inner city with no transfer duties payable as well as Urban Development Zone tax incentives.

Marketed by Dogon Group Properties Castle Rock consists of luxury studio, one, and two bedroom apartments with views from their balconies, ranging in size from 41 m2to 99 m2. The block is near the mountainside, five blocks from the Cape Town city centre.

Finishes include fibre connectivity, Smeg kitchen appliances, and natural stone surfaces in kitchens and bathrooms. Castle Rock has ample parking, a concierge desk and 24 hour security, according to Rob Stefanutto, director and head of Dogon Group Developments.

“Globally, history has shown that rejuvenated city centres offer significant capital growth. Current apartment sales within a 1km radius of Castle Rock are sold at R50 000/m2, whereas Castle Rock’s cost is R20 238/m2.”

Prices start at R1.495 million including VAT, with no transfer duty payable. In addition to this, buyers – including individuals, companies, close corporations, trusts and partners in a partnership – qualify for an Urban Development Zone (UDZ) tax incentive.

Stefanutto says the UDZ tax allowance does not prevent taxpayers from deducting any other expenses such as improvements, levies, rates, bond interest on the property from their normal taxable income.

“A UDZ tax allowance allows taxpayers to claim 55% of their purchase price. To do so the municipality must issue a certificate to buyers, confirming that the building is in a UDZ of that municipality and the developer also has to give a certificate to the buyer confirming that certain requirements have been met. These include that the erection or improvements commenced after the area was declared a UDZ, and the improvements either covered the whole building or an area of at least 1 000m2.”

“Sales have been robust and we only have a few units left in Castle Rock,” says Byron Kruger, agent for Dogon Group Properties. “This is unsurprising given the UDZ tax incentive, the development’s location close to top learning institutions and tourist attractions, such as the V&A Waterfront, and easy access to public transport.”

Castle Rock is nearing completion and occupation is expected for October 2019.