What is the Pinel law ?
2 December 2023
The Pinel law is a property tax exemption scheme introduced in France in 2014 by Sylvia Pinel, Housing Minister in the Valls I and II governments. The aim is to encourage investors to buy new properties or properties in a future state of completion (VEFA) and then rent them out to people on low incomes. If the property was built at least 15 years ago, it must have undergone renovation work.
In return for this rental investment, owners benefit from an income tax deduction of up to 17.5% of the amount of their investment, spread over a period of 12 years. The percentage tax reduction depends on the length of time the property is let. The rate of tax reduction is applied as follows: 10.5% tax reduction for a 6-year rental period; 15% for a 9-year rental period; 17.5% for a 12-year rental period.
To qualify for the Pinel law, you must meet a number of conditions, including buying a new property or one that has been prefabricated, letting the property within 12 months of purchase, letting the property as the tenant's principal residence, and complying with rent and income ceilings for tenants.
In most cases, buying a property involves taking out a mortgage. And banks often require borrowers to make a downpayment. Thanks to the Pinel law, it is now possible to take out a mortgage and buy a property without a down payment.
In fact, the tax deduction and the rent received for letting the property provide a regular income that will go a long way towards repaying the loan. What's more, the interest on the loan is deducted from the rent received and does not have to be paid by the borrower. Banks will therefore be less reluctant to grant a loan to someone who has no personal capital contribution