Italian Real Estate Leaseback Scheme: buying a house in instalments
The real estate leaseback scheme is a financial product for those whose annual income does not exceed 55,000 Euro and are in a position to take advantage of first home benefits, in other words, people who do not already own another property.
The contract can only be entered into by individuals and banks or leasing companies. The bank or leasing company commits to buy, or to build, a property on behalf of a client, who then becomes the property lessee. The property is therefore owned by the lender, while the lessee has the right to use the property upon payment of an initial instalment and a monthly rent thereafter.
The lessee has to make the property being bought or built their main residence, meaning the one in which the lessee or the lessee’s family usually lives.
The leaseback contract has an annual interest rate and fees attached. These are calculated on the basis of the property purchase price and the duration of the leaseback contract.
When the leaseback contract expires, the client can exercise the right to buy the property by paying a final instalment which will have been established at the outset of the leaseback contract. If the client has a change of heart, the property can be relinquished without the lessee being penalised.
If the lessee is unable to make the monthly rental payments because of a loss of employment, there is a legal, one-off, right to suspend payments for a maximum period of twelve months.
The 2016 Stability law also introduces a series of tax incentives on both direct and indirect taxes, which has the aim to boost the use of the new real estate leaseback scheme.
More specifically people under the age of 35, can benefit from income tax deductions:
- A 19% deduction on expenses incurred for leaseback rents, as well as related ancillary costs. An annual sum not higher than Euro 8.000;
- A 19% deduction on the buyback cost, where the client decides to exercise the right to buy the property. Up to a sum not exceeding Euro 20,000.
People over 35 years of age can also benefit from income tax incentives in the property leaseback scheme:
- A 19% deduction on expenses incurred for leaseback rents, as well as related ancillary costs. An annual sum not higher than Euro 4.000;
- A 19% deduction on the buyback cost, where the client decides to exercise the right to buy the property. Up to a sum not higher exceeding Euro 10,000.
In order to benefit from the above-mentioned tax incentives, the lessee must make the property their main residence within one year of taking possession of the property.