Macri focuses new stimulus drive on construction, mortgage holders

Argentina’s government said it would be sending legislation in the coming days to support the construction and real estate sectors as well as providing tax relief for mortgage holders.

The overall goal is stimulate economic activity and give more people access to housing.

The announcement comes as President Mauricio Macri (pictured) is struggling to shore up his approval rating in polls ahead of the October presidential election. Former populist president Cristina Fernández de Kirchner is leading the polls but she has not yet confirmed if she will run.

The Argentine economy is in a recession with high interest rates, inflation, weak consumer confidence and marked deterioration in the mortgage market.

A statement from the production and labor ministry indicated the bill would include tax incentives for construction and real estate projects during 24 months.

In addition, it contains tax relief for mortgage debtors who would be able to make a tax deduction of up to 85,000 pesos (US$1,890) on interest paid.

The proposed legislation includes changes to the nation’s laws for income tax, value added tax, and the credit and debit transaction tax (ICDB).

“In addition to stimulating the activity of construction and real estate, and employment in these sectors, an impact on the entire economy is expected from the multiple activities linked to the construction sector in industry, transport and services,” read the statement, adding that construction represents around 5% of GDP and almost 9% of private sector employment.

Several items in the bill affect the broader financial system and the banking sector.

Reinvestment in property funds 

The law would make it possible to defer tax payments on gains made through real estate sales, if and when those gains are reinvested in mutual funds or financial investment trusts that are open to the general public and directed towards the real estate sector.

Deduction of mortgage loan interests 

The statement noted that it has been almost 20 years since the last update on interests linked to mortgage loans, which currently sits at 20,000 pesos per year. The bill proposes to raise this to 85,000 pesos and integrate a mechanism for this cap to be automatically updated in the future.

Credit and debit tax code 

For all new real estate development, 100% of the ICDB would be computed against the income tax, which is currently 33%. Thus, the gradual process set forth in the tax reform that began in 2018 would be advanced for this activity.