UDZ incentive boosts Voortrekker Road Corridor

UDZ incentive boosts Voortrekker Road Corridor

The UDZ tax incentive extension has enabled New Property Ventures to develop the BSE building in Voortrekker Road, Bellville.

The recent promulgation of the Taxation Laws Amendment Act (No 22 of 2012) extends the validity period for the Urban Development Zone (UDZ) to March 31, 2020.

In addition, the city’s application to geographically extend the UDZ has been approved by the Minister of Finance and now includes significant portions of Maitland, Parow and Oakdale. This extension complements efforts by the mayor’s urban regeneration programme and the newly-established Voortrekker Road Corridor Improvement District (VRCID) to boost private sector investment in these areas.

“This is very good news for any developer or investor who sees the potential in the Bellville and Parow CBD areas,” says VRCID chief operations officer, Derek Bock.

The UDZ tax incentive was introduced by the National Treasury in 2003, and its purpose is to promote urban development and regeneration through an accelerated depreciation allowance for any new developments and refurbishment of existing buildings. Commercial and residential developers both qualify if their buildings are within a UDZ.

“From the VRCID perspective, we already have developers making use of this tax incentive as this is an incentive to develop new buildings and redevelop rundown buildings within the VRCID. Landlords of problem or rundown buildings must grab this opportunity to be part of the solution towards the renewal of Bellville and Parow CBDs. Developers should see this as an open invitation by the City of Cape Town to invest in the VRCID,” says Bock.

“For example, if an investor buys a rundown building within the UDZ area for R5 million and spends R20m on renovations then the investor can deduct 20 percent a year of the R20m refurbishment and upgrade costs over five years once the building is occupied.

“This means that the owner can write off a certain amount to tax every year for five years. Only the initial property purchase cost does not qualify for the UDZ tax incentive.”

Another plus point is that the UDZ incentive also applies equally to residential and commercial property. As there are many residential properties in dire need of renovations within the VRCID, their owners no longer have an excuse not to upgrade their properties.

“The UDZ tax incentive is a great tool to bring back investment in the VRCID. Property prices are still relatively low in the Bellville and Parow CBDs. We have seen interest rise in this area with more enquiries as to which properties are for sale. It will take time but I am confident that we will see positive developments as we market the VRCID to investors and developers. There are also fewer heritage concerns here than in the older areas of Cape Town, which counts in favour of developers,” says Bock.

“With each new development, we are ensuring that Bellville and Parow CBDs don’t go the way of other CBDs in some of South Africa’s major centres. The UDZ tax break plays a part in this process to reverse and stop urban decay in its tracks,” says Bock.

For information on the UDZ tax incentives visit www.capetown.gov.za.

 

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