The regulations which will enter into force in the next few months which will impact Luxembourg enterprises in the real estate sector

The following are among the most important bills affecting the real estate sector which could be adopted over the next few months, and probably before the end of the current legislative session:

  • Bill No. 7642, amending the Law of 21 September 2006 on housing leases, as amended, which should eliminate the category of luxury housing;
  • Bill No. 7139, amending the Law of 19 July 2004 on municipal land management and urban development seeking to accelerate the provision of infrastructure services on constructable lands with a so-called “constructible land contract” (Baulandvertrag) land use planning contract, but was significantly amended in 2020 with the introduction of infrastructure service and construction easements, the costs of which are to be borne by the landowners, with drastic consequences in case of non-compliance. It also provides for the introduction of a ministerial reparcelling procedure to allow the implementation of specific land use plans for non-complying landowners. However, this bill is complex and it remains to be seen whether it can actually result in a law in the immediate future.

One should also expect new fiscal measures, some of which have already been announced.

The government intends to reform property taxation. Thus, over time one should expect an increase in property taxes, with the application of a progressive tax on lands upon which housing can be, but is not yet, constructed. For the time being, there is no bill, but one could be introduced in the next few months.

Regulations already passed, but which continue to keep Luxembourg real estate enterprises busy

Four Grand-Ducal Regulations of 10 February 2021 rendered obligatory housing sector, landscaping, transport and economic activity zone master plans. These master plans substantially impact the planning options for numerous national zones and must be taken into account in the evaluation of a real estate project in one of the zones covered by a sectoral master plan.

The Law of 30 July 2021 on the “Housing Pact” (Pacte logement) with municipalities aiming at increasing the availability of affordable and sustainable housing (“Housing Pact 2”), which extends from 1 January 2021 through 31 December 2032. The law provides for the land transfer obligations for affordable housing due either to the municipalities, or to the State to support greater acquisition of housing by the public sector. The State’s 2022 budget plans to double the allocation reserved for acquisitions by the State. Simultaneously, the law contains an obligation to reserve, in real estate projects, a greater portion of the constructed surface area for moderately priced housing, a portion that reach up to 30 %.

The Law of 25 March 2020 extended to real estate developers the obligation under the Law of 12 November 2004 on the fight against money laundering and the financing of terrorism, already incumbent upon other regulated professions, including real estate agents. As applicable, it is in this context that we recommend that real estate developers and agents review, and as necessary, update their AML procedures.

It should be noted that in 2021 a certain number of Grand-Ducal regulations have been adopted, creating protected areas around groundwater sites, limiting exploitation and the ability to construct on parcels located on those zones.

Luxembourg real estate market’s competitivity and regulation

We deem the Luxembourg real estate market to remain competitive. Simultaneously, we observe that several real estate projects could be realised more quickly if administrative procedures would allow. In particular, better integration of authorisation procedures should allow the faster attainment of one of the main political goals with respect to real estate, the construction of more housing.

By Mario DI STEFANO, Managing Partner – Avocat à la Cour.