Buying a piece of land for building a house may be an alternative to buying a house, whether new or resale. Although this option has downsides, namely the amount of time and the complexity involved, it offers the advantage of a creative project that will produce a house that is exactly as you wanted and imagined it. When considering plots of land, there are two basic categories:
Land earmarked for development
Land classified in this category is still not approved for building a house, and the town hall won’t grant the corresponding building permit until prior transformation and conditioning works are carried out.
In some cases, according to the stipulations of the Municipal Urban Development Plan (POUM), it will be necessary to produce an urban development plan in line with the so-called derivative planning of the municipality, in the form of a partial plan or unit of action, etc. After this, the corresponding Urban Development Project must be drawn up and then executed.
In other cases the derivate planning of the municipality may already be completed and it will only be necessary to draw up the Urban Development Project and carry out the execution of the works.
Approved urban development land/plot
In terms of both planning and the execution of works, the land classified in this category is ready for building a house. In such cases, after submitting the Construction Project and completing the corresponding paperwork, the town hall will grant the building permit and work can immediately begin on the construction of the house.
These are plots in zones where the urban development work has already been completed: roads are asphalted, pavements are in place, street lighting and drains are operating, and connection points are ready for the supply of utilities: water, electricity and gas, if applicable.
Aspects for buyers to take into account
You obviously have to like the location and size of the plot. Orientation, natural light and views are also very important factors. You will also need to consider what services and amenities are available, the proximity of the plot to the town/city centre, and transport connections.
The land must be suitable for the purpose for which it is bought, whether as an investment or, more usually, in order to build a house. The first step is to find out in which category the land is classified. If it is land earmarked for development, you need to know how much paperwork has been done for obtaining approval and which administrative fees remain pending. In the case of approved development land, you will need to find out which urban development regulations apply: uses, occupancy, plot ratio, permitted heights and other construction parameters. At Gènion Immobles, we always find out this information before putting up for sale any building land and potential buyers are always fully informed of the urban development conditions.
Taxation
The applicable taxation when buying building land is either Property Transfer Tax (ITP) or VAT + Tax on Documented Legal Acts (AJD). Plots must be evaluated on a case-by-case basis in order to know which option is applicable.
If the seller is a private individual who is not subject to VAT, the sale and purchase of the building land will be subject to Property Transfer Tax (ITP), which amounts to 10% of the value of the land stipulated in the land deeds.
If the seller is a property development company, or a private individual subject to VAT (normally due to having paid contributions to a so-called Compensation Board, which is an entity made up of the owners of the land comprising a single building execution unit), the sale and purchase of the building land will be subject to VAT; that is, 21% of the value of the land as stipulated in the land deeds. In this case, the transaction will also be subject to Property Transfer Tax (ITP) (1.5% of the value). As such, the total amount of tax payable will be 22.5% of the value of the land.
At Gènion Immobles we have a proven track record in the sale of earmarked and approved building land. We provide our customers with comprehensive, tailored advice on development regulations and taxation.