Investment in property has been recognized as the unfailing means of acquiring wealth. The phrase ‘safe as a house’ is clichéd. Yet, it is the only truth in the context of return on investment scenario. Return on investment in property is a slow process. However, it is an investment that never fails. History also testifies to the fact that investment in property is a minimal risk investment. The return from the property, services the investment. The net worth grows over time and generates income for further investments in property.
Like any other investment, Property investment is a skill which has to be learned. The investor must be aware that there are risks attached to any kind of investment. He must also consciously acknowledge the fact that during the process of investment the risks attached seem to be magnified. He must also accept that, the right choice of property, combined with considered management are absolute essentials in any property investment. Property investment is a serious business that requires the right kind of commitment.
Before actually launching into the purchase of a property, the investor must be clear as to the purpose of investment. If investment may be for:
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Personal use
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To buy and Let
The purpose will determine the type and location of the property. In the former instance property may have to be located close to the place of work or near an educational institution. The type of property may not per se be of importance. Its location may be important. In the latter case all aspects of the property assumes importance. It is a property purchased as an investment and the investor expects a return on property investment.
Investment Property should be selected keeping in mind the following environmental factors:
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High employment area
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Attractive buildings and surroundings
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Public Transport facilities
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High capital growth
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Developing areas
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Low maintenance costs
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High demand by letting agents
The Return on Investment (ROI) expected will include factors such as
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Appreciation of the asset
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Regularity of rental income
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Long term stable tenants
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Care by property managers.
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Tax benefits
Investing in foreign countries requires an understanding of the laws and systems as it impacts on investment by foreigners. It also requires an understanding of the socio-economic fabric of the country as it will have a bearing on the value of the property. Therefore, investing in property in a foreign land requires the investor to stay in the country for some time or a study of the socio-economic-demographic and political setup of the country in so far as it impacts on foreign investment in property.
Investment Climate and laws relating to foreign investment in Madeira, Portugal.
Madeira is a tax haven but not of the traditional kind. The Financial centre was set up with the full approval of the European Community and the tax incentives are structured with a positive orientation. Madeira attracts clients from the European Union prepared comply with the regulations emanating from Brussels and Lisbon. Supervision is very strict and is similar to the supervision that is applied to all mainland companies in Portugal. As a financial centre it tends to be more expensive as it attracts international groups who seek assistance of international tax lawyers and advisers before implementing their structures. If a Madeiran company obtains a VAT number it has unrestricted access to the European single market and if the company is licensed to operate under the Free trade Zone legislation, it has to pay a VAT of 12% as against the Portugese 17%.
The laws of Portugal encourage investment by foreign entities in immovable property in Portugal. A democratic form of Government, a technically skilled labour force, low labour costs, a younger population, massive infrastructure developments in rural areas, English speaking people and friendly people have all contributed to providing for an attractive investment climate in Portugal.
Generally, no discrimination is made between Portuguese and foreign investors in the country. However, foreign investors are required to report to the investment authorities, the ICEP within 30 days of making the investment. In Madeira, a foreign investor must register with the Planning and finance Ministry. Investment incentives are also available for investment in property development to the tune of Euro 150,000 or less. Loans are available for 30-60% of the investment cost at reduced rates of interest. There is also a possibility of converting about 15-60% of the loan into a grant at the end of the investment period.
The documents required for investment in property are as under
1)Tax number ( numero de Contribuinte) ·
2)A Habitation License for any property which has been built after 1951 ·
3)A Certified insertion in the records of the local "Conservatorio" which is the Land Conservatory ·
4)A detailed "Caderneta Urbana" from the local "Financas" which is the Tax Office ·(If one has purchased rural property one will also need the "Caderneta Rustica" issued by "Financas")
Portugal is a member of the International Centre for the Settlement of Investment Disputes (ICSID) and accepts binding arbitration of investment disputes between foreign investors and the State.
Investment in property in Madeira, Portugal requires the services of a local lawyer. It is also important to demand and examine the licenses of Real Estate agencies before attempting any investment in this country. It would be in your interest to lease or rent property for a period and stay in the land before making any real estate purchases. Once you have the pulse of the place, hire a lawyer of repute and get him to draw up the preliminary contract to be signed by parties to the transaction. Get it witnessed by a notary public and registered in a Notary office. The title search in the Town hall is a must and you must be sure that the property and its construction match with what is on record in the Land Registry. If the property was built post 1951, a Habitation license must exist. The tax number of property must be obtained from the local Tax office and a passport or ID card will be required for this purpose. An earnest money deposit will be required to be paid which ranges from 10-15% of the sales price. The final contract should be signed in the presence of a Notary Public and the balance price will have to be paid after both parties have signed the contract. The transaction will then be recorded by the notary in the Land Registry and the tax documents will be filed them in the tax office. |
