By Thomas Thale
FROM July, developers who invest in the Joburg inner city will get a special tax incentive as part of government's new intervention to regenerate inner cities across the country.
This is in terms of the new Revenue Laws Amendment Act promulgated in December, which provides for developers who refurbish existing buildings in designated areas to receive a 20 percent depreciation allowance over a period of five years. In terms of the Act, developers who construct new buildings are to get a 20 percent tax write-off in the first year followed by a five percent annual write-off over a 16-year period. The Act requires municipalities to speed up the processing of planning approval applications.
In its February sitting, the city council resolved to endorse the inner city of Johannesburg as its urban development zone in line with the Act. The City had initially earmarked four areas to benefit from the plan: the inner city, and the business districts of Roodepoort, Lenasia and Randburg, with the inner city being given priority. However, the National Treasury limited the extent of the incentive. This means the inner city is now Johannesburg's designated urban development zone.
"But this does not mean the other areas will be neglected," says Li Pernegger, programme manager in the City's Economic Development Unit. "We have got to push for the redevelopment of these areas. We are in the process of appointing consultants to re-engineer these areas for long term development and management," Pernegger adds.
"The idea is to lean on the market and developers sitting on the fence. We want them to appreciate that it is viable to undertake development in the inner city," explains Pernegger. The incentive will apply to developers who construct or renovate residential, commercial and mixed-use properties in the inner city. Both owners and lessors of properties will qualify for the incentive.
Whilst welcoming the new measures, property economist Francois Viruly, calls for a greater effort in marketing the inner city. "I believe that the supply side is important, but that when new uses of space arise, they must be aggressively marketed. Incentives will then become a cherry on top. People should know what spaces are available. Information flow plays a marketing role."
The inner city comprises the city center and Braamfontein; the lower density, predominantly residential areas to the east of the city centre, consisting of Yeoville, Bertrams, Troyeville, Jeppestown; the higher density suburbs of Berea and Hillbrow; and the areas of Newtown, Fordsburg and Pageview/Vrededorp to the west of Newtown.
Inner city regional director Yakoob Makda says the incentives will "ensure further cash injection from both the private and public sector into inner city renewal. The City will be taking full advantage of the incentive offered to continue to expand and sustain the vital work being done".
Pernegger anticipates that the new measures will benefit "especially those parts of the city like Hillbrow and Berea, which have high density developments". In terms of the City's regional demarcations, all these areas fall within Region 8.
Viruly concedes that in recent years, an increasing number of investors have moved into the inner city. "I certainly believe that the property market in the CBD is in a better position than it was a few years ago," he says, attributing the increased confidence in the city to "a better urban environment created by the Johannesburg Development Agency, the City and Blue IQ".
But he also believes that "in the last two years, the most attractive deals have been picked out by speculative investors and that the market is beginning to stabilise".
The proposal and rationale for the Johannesburg inner city to be declared an urban development zone will be sent to the Minister of Finance, Trevor Manuel, for his approval before the end of June. Once the Minister grants his consent, he will promulgate the area in the Government Gazette, paving the way for the inner city to become a priority area for further investments, to promote business and industrial activity, says Pernegger.
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