Individuals or households that purchase new housing off-plan (VEFA) are legally exempt from the property tax for two years starting January 1st the year after construction has been completed. When you receive your keys you need to ask for the “H2 form,” which you should send to your tax office. Be aware that this exemption is not automatic and that local and regional governments can decide to apply either total or partial waiver of the tax. Don’t forget to ask to find out exactly what the local rules are.
Preferential financing terms
The French government has a variety of incentive programs that entitle qualified homebuyers to loans at lower rates than conventional loans. You should check to see if you are eligible for one of these subsidized loans.
Interest-free loans & the new interest-free mortgage
One of the most advantageous and widely known types of preferential financing is called “Prêt à taux 0%,” or interest-free loan. The French state subsidizes these loans to enable people to finance their primary residence. Eligibility depends on your income, your family situation and the location of the property
The new interest-free mortgage is granted by various local authorities. BBC certification enables homebuyers to obtain a bigger mortgage.
Find out more about interest-free loans
Subsidized & social » loans
You can also apply for a subsidized type of loan called prêt conventionné (PC), which are not subject to any income thresholds or caps on the price per square meter. The rates are comparable to market rates. These “PC” loans make you eligible for a housing benefit called Aide personnalisée au logement (APL), which is subject to income thresholds. However, if you qualify, you can apply the APL against your loan payments. In addition, the cost of the bank guarantee or mortgage is lower, since transfer costs are lower for these loans compared with conventional loans.
Employer loans
If you work in a company with ten or more employees you have access to an employer loan called prêt 1% logement. While the amounts are limited (€17,700 maximum), the rates are very low (1.5%, not including insurance and guarantees), making this an option that you should definitely explore. Other subsidized lending programs are available to government employees, or provided via regional government agencies, or the family benefits agency (Caisse d’allocations familiales), for example. Don’t forget possible family loans either, which should be notarized and repaid to avoid being qualified by French tax authorities as undeclared gifts.
Tax advantaged loans for low-income rentals
Individual investors and investment vehicles can finance acquisitions using a tax advantaged loan for low-income rental housing called a prêt locatif social (PLS). In addition to tax advantages these loans have attractive rates (see section on tax incentives to encourage property investment in France).
The variable rates on these loans are indexed to the interest rate for Livret A savings accounts. The loan term is limited to 30 years, but there is no minimum regulatory duration.
These loans can be used to finance 100% of new properties, with a minimum of 50% of the total transaction price, including 5.5% VAT. The bank that grants the PLS loan is not allowed to offer any supplementary financing.
There is a ceiling on administrative expenses for arranging these loans:
- €700 for individual lenders
- 1% of the projected cost price for acquisitions made through investment vehicles.
Tax incentives to encourage property investment
Investors who buy new properties can take advantage of several French tax incentive systems designed to increase the stock of private-sector rental properties while ensuring affordable housing for low-income families by capping rents. The two main systems are called & Robien Recentré » and & Borloo ».
There are also several other tax incentive systems for new properties that are worth examining, including:
- Location en Meublé Professionnel (LMP) – (Tax advantaged furnished property rentals by a company)
- Location en Meublé non Professionnel (LMNP) (Tax advantaged furnished property rentals by an individual)
- Le Prêt locatif social (PLS) (tax advantaged loans for low-income rental housing).