By Nick Wilson

Aengus Lifestyle Properties will be rolling out 500 to 700 affordable residential units in Johannesburg's and Durban's inner cities this year to cater for first-time home buyers and investors.

The company, a joint venture between Aengus Property Holdings and listed property loan stock company ApexHi Properties, has developed several apartment blocks in these inner cities over the past four years but held them as rental stock.

Aengus Property Holdings MD Richard Rubin says the joint venture will be selling affordable loft apartments to the investor market and owner-occupiers.

"What is interesting is our units are already built and our collections are 100%, so we don't have arrears and we don't have vacancies. Usually, developers sell off-plan and there is a development risk that the investor or owner occupier is taking on their unit," says Rubin.

Aengus's sales are merely dependent on a sectional title register being opened.

"As an investor, you can also take a view on the rental market because we've had 100% occupancy for the past four years. We will be releasing in the region of 500 to 700 units, both in Durban and in Johannesburg."

The price for units will range between R220,000 and R250,000.

Rubin says tenants who want to continue living close to their places of work in the inner city will receive first option to buy their units.

Investors will also benefit from the urban development zone (UDZ) tax incentive introduced by government in October 2004.

In terms of its incentive, government offers a 20% tax deduction from all income earned in the first five years after a building has been refurbished.

This means if you redevelop a building at a cost of R10m, then R2m of annual income earned from renting or trading in the building is tax deductible for a five-year period.

For new developments, government offers a tax deduction of 20% in the first year in which the building starts earning an income, along with an annual depreciation of 5% for the following 16 years. So, if you spend R100m on a new building, then R20m of your first year's income is not taxed, nor is R5m of income for the next 16 years.

"The investor market will get the knock-on effect of the UDZ tax incentive," says Rubin.

He says the group will be doing other developments in the inner city this year to replenish its "rental stock supply".

Business Day