Established in September 2014 by the Minister of Housing of the Valls government, the Pinel law is aimed at all French taxpayers. This measure aims to improve the relationship between the supply of recent housing and rental demand, while encouraging real estate investment.
This device was extended in 2019 until 2021, but how does it work? And what are the benefits for owners? Explanations.
The government’s objectives and the financing of the Pinel investment
For the government, the objective of the Pinel system is to meet the ever increasing rental demand, especially in certain areas. Please note, this is only new housing and in certain areas.
This device also tends to allow people with an intermediate income, but not entitled to social housing, to rent a free property on the market.
Eligibility according to zones
There are 5 eligible areas characterized by rental demand and housing prices. The eligible zones until 2021 are zones A, A bis and B1.
These last 3 correspond to:
- The Côte d’Azur, the agglomeration of Geneva and other agglomerations where the price is very high (zone A);
- The Parisian agglomeration, for the city of Paris and in 76 municipalities (zone A bis);
- Agglomerations with high rents, which also includes a certain part of the Parisian crown and the overseas departments (zone B1).
For example for the city of Nantes it is zone B1. This is why some agencies like Bras Immobilier offer new programs for buyers who wish to invest in order to be exempt from taxation or to live there.
How to benefit from the tax reduction?
For owners who invest in new real estate, the system allows them to benefit from a tax reduction of up to 21% and under certain conditions.
To benefit from this tax reduction, the home must be built or acquired between 1er September 2014 and December 31, 2021.
It must meet the BBC 2005 or RT 2012 energy performance standards and must be rented for a period of at least 6, 9 or 12, and in eligible areas.
The investment must not exceed 300,000 € and the owners undertake to respect the rent ceiling of the zone in which the accommodation is located and to respect the resource ceiling of its tenants.
All the provisions for benefiting from Pinel financing are detailed in the article of the Pinel Law, to be found in the General Tax Code.
The 3 main advantages of the Pinel device for owners
If we have to recap what the Pinel Law allows, we could highlight 3 major advantages, and not the least.
A tax advantage through tax reduction
This amount depends on the rental period of the property. Indeed, the State can pay you back between 12% and 21% of the price of the property (up to € 63,000). For a 6-year rental, the owner benefits from a 12% reduction in the price of the property. For a 9-year rental, a reduction of 18%. And for a rental of 12 years, a reduction of 21%.
For example, for an investment of € 150,000, the owner will benefit from a tax reduction of € 27,000 per year, for a new home rented for 9 years.
Build up real estate
Real estate investment has a very attractive return over the long term. This heritage will also be easily transmitted. In addition, with this device, you do not need to provide an initial contribution to invest, you can borrow, unlike the financial markets.
Prepare for a peaceful retirement
As you know, retirement is not always easy financially. With the Pinel device, once the legal period for renting a home expires, owners can continue to receive additional income by renting it out, reselling it to recover a capital gain, or even living there (whether act as a secondary or main residence).