The redevelopment of downtown Kingston has long been talked about but has failed to inspire real estate developers who are hesitant to build in the bustling centre of the capital city.

Real estate developers are speaking out about the Tax Incentive Programme (TIP), which was launched in downtown Kingston in 1995, with a view to revitalising urban centres defined as blighted or Special Development Areas. Downtown Kingston was designated as the first such area.

The incentives are offered to both owners and lessees of property in select Special Development Areas identified as suffering blight or decay. Under the incentive programme, tax relief is offered to companies or individuals undertaking capital investments in either land or buildings.

These can be residential or commercial holdings. Three types of incentives are available under the TIP. They are an urban renewal bond, an investment tax credit, and tax-free rental income offered through the TIP.

Even with these so-called ‘sweeteners’ for real estate development in the droves anticipated at the time, the developers are far from inspired, and their avoidance of going downtown with developments tells a sad tale about the TIP. While there have been some developments in the location over the years since the TIP was launched, they have been few and far apart.

Among the few companies to have become beneficiaries of the TIP in downtown Kingston are Digicel, GraceKennedy Limited, NEM Insurance now JN Insurance, Courts Jamaica, Konvertra, Guardsman, and Issa Construction.

Issues with the TIP

Managing Director (MD) of First Rock Realty Pierre Shirley highlights that the TIP was a good start with great intentions but fraught with challenges for developers – the main one being the length of time. He cited that, in the first instance, the TIP was available for 10 years (reducing).

Shirley argued that as time passed, “the attractiveness of the programme diminished”. For example, if an investor was desirous of investing in downtown, there is a lengthy and bureaucratic process involving the Urban Development Corporation, which administrates the TIP on behalf of the Ministry of Finance.

He itemised the process involved, such as locating the property, negotiating the sale, finalising the details of the contract, completing the transfer, co-ordinating a development team, completing drawings/plans, submitting drawings for approvals, awaiting approvals, commencing construction, and completing construction. Arguing that this entire process, at best, would take a minimum of two years, Shirley explained that this is assuming that the developer started on this journey from day one.

The First Rock Realty MD remarked that, “a developer/investor would then only have eight years remaining to benefit from what was intended to be a 10-year relief. Let alone an investor [who] started considering the opportunity 2-3 years after it was implemented and putting into consideration the aforementioned process, the programme became less favourable.”

Shirley suggested that the Government revisits the TIP and make amendments to the timelines so that they are realistic and in line with the building process. For example, the tax-free rental income is to be for a period of 10 years upon completion of the development, evidenced by the date of the Practical Completion Certificate rather than 10 years from the start of programme.

Other developers spoken to echoed similar sentiments, admitting that the TIP, in its present state, is not attractive enough for them to invest in downtown Kingston. Issa Construction, which has benefited from the TIP, cited many shortcomings and issues with the incentive initiative for redeveloping the capital city.

TIP renewed for an additional 10 years

The TIP, which expired on September 15, 2015 has been renewed for an additional ten years. The TIP is just one of the investment vehicles that is being utilised to further spur the redevelopment of downtown Kingston and Port Royal.

The policy for the two culturally rich areas is aligned with the Vision 2030 Jamaica national development plan. It provides tax relief to companies or individuals undertaking improvement works on either land or buildings.