The Grace Kennedy Building in downtown Kingston.
the Kingston’s downtown redevelopment has long been talked about, but it has failed to inspire property developers wary of building in the bustling center of the capital.
Property developers speak of the Tax Incentive Program (TIP), which was launched in downtown Kingston in 1995, to revitalize urban centers defined as run-down areas or special development areas. Downtown Kingston has been designated as the first such area.
The incentives are offered to both owners and tenants of properties in certain special development areas identified as suffering from degradation or degradation. Under the incentive scheme, tax breaks are offered to companies or individuals who invest in land or buildings.
These can be residential or commercial properties. Three types of incentives are available under the TIP. This is an urban renewal obligation, an investment tax credit and tax-free rental income offered by the TIP.
Even with these so-called “sweeteners” for real estate development in the masses planned at the time, developers were far from inspired, and their avoidance of going downtown with developments tells a sad story about the TIPS. Although there have been some developments in the location over the years since the launch of the TIP, they have been few and far between.
Among the few companies to have become TIP beneficiaries in downtown Kingston are Digicel, GraceKennedy Limited, NEM Insurance now JN Insurance, Courts Jamaica, Konvertra, Guardsman and Issa Construction.
Problems with the TIP
First Rock Realty’s Managing Director (MD), Pierre Shirley, points out that the TIP was a good start with great intentions, but fraught with challenges for the developers – the main one being the duration. He cited that, initially, the TIP was available for 10 years (reduction).
Shirley argued that over time, “the appeal of the program waned”. For example, if an investor wishes to invest in the city centre, there is a lengthy and bureaucratic process involving the Urban Development Corporation, which administers the TIP on behalf of the Ministry of Finance.
He detailed the process involved, such as locating the property, negotiating the sale, finalizing contract details, completing the transfer, coordinating a development team, completing drawings/plans, submitting drawings for approval, awaiting approvals, commencing construction, and completing construction. Arguing that this whole process, at best, would take at least two years, Shirley explained that this assumes the developer has started this journey from day one.
First Rock Realty MD noted that “a developer/investor would then only have eight years to qualify for what was supposed to be 10 year relief. Even less an investor [who] started to consider the opportunity 2-3 years after its implementation and taking into account the above-mentioned process, the program became less favorable.
Shirley suggested that the government review the TIP and make changes to timelines so that they are realistic and consistent with the construction process. For example, the tax-exempt rental income must be for a period of 10 years from the completion of the development, evidenced by the date of the certificate of practical completion rather than 10 years from the start of the program.
Other developers interviewed echoed similar sentiments, admitting that the TIP, in its current state, is not attractive enough for them to invest in downtown Kingston. Issa Construction, which benefited from the TIP, cited many shortcomings and problems with the capital redevelopment incentive initiative.
TIP renewed for another 10 years
The TIP, which expired on September 15, 2015, was renewed for a further ten-year period. The TIP is just one of several investment vehicles being used to further stimulate the redevelopment of downtown Kingston and Port Royal.
The policy for the two culturally rich areas is aligned with the national development plan Vision 2030 Jamaica. It grants tax breaks to businesses or individuals who undertake improvement work on land or buildings.