Real Estate in Portugal: New Opportunities for Construction on Rural Lands

On 28th November, the Portuguese Government approved a decree-law amending the Legal Framework for Territorial Management Instruments (RJIGT). This temporary measure allows local authorities to designate new residential areas on rural lands in an effort to address Portugal's ongoing housing crisis. By increasing the availability of affordable housing, particularly for middle-class families, the government aims to promote housing equity and uphold the fundamental right to adequate housing, which is enshrined in the Portuguese Constitution.

The housing shortage in Portugal has been exacerbated by rising property prices, a growing population, and limited construction in recent years. This initiative seeks to alleviate these pressures by unlocking the potential of rural lands for residential development. 

It is important to note that this decree-law amendment is still in the deliberation phase. It will proceed to hearings with the National Association of Portuguese Municipalities (ANMP) and other relevant entities, and the final version has not yet been concluded.

Under this framework, at least 70% of the homes built on designated lands must be offered at affordable prices. To ensure accessibility, the maximum price for these homes is capped at either the national median house price or 125% of the median price in the respective municipality, whichever is higher.

In municipalities with higher housing costs, such as Lisbon and Cascais, the price limit is set at 225% of the national median. By providing these pricing thresholds, the government hopes to attract middle-class buyers while simultaneously encouraging developers to invest in the interior regions, where property prices are typically lower.

The remaining 30% of houses constructed on these rural lands are not subject to any price or rental restrictions, giving developers greater freedom to target other market segments. This dual approach not only supports affordability but also ensures that developers have sufficient incentives to participate in these projects.

While these measures open up significant opportunities for development, they are carefully balanced to preserve the integrity of Portugal's protected lands. Lands classified within the Agricultural and Ecological National Reserves are explicitly excluded from these new provisions. These reserves are vital to the country's environmental sustainability and food security, ensuring that highly suitable agricultural lands and essential ecosystems remain protected. For instance, construction is prohibited on land designated as highly suitable for agricultural use under the Portuguese National Agricultural Reserve. Similarly, the National Ecological Reserve safeguards areas critical for biodiversity, climate resilience, and risk prevention, such as floodplains and coastal zones.

In addition to addressing housing shortages, this initiative aims to stimulate economic growth and counteract regional disparities. By focusing on Portugal’s interior regions, the government seeks to revitalise areas that have faced population decline and limited economic opportunities. This strategy not only benefits local communities but also offers attractive investment opportunities for developers and property owners seeking to diversify their portfolios.

The new decree law is a significant step in tackling one of Portugal's most pressing social challenges. By integrating affordability, sustainability, and economic incentives, the policy represents a balanced approach to addressing the housing crisis. It underscores the government’s commitment to ensuring that all citizens and residents have access to adequate and affordable housing while maintaining the country’s natural and agricultural heritage.

If you require assistance with real estate matters in Portugal or legal advice related to Portuguese property, please do not hesitate to contact us. Our team is ready to offer tailored support and expert guidance.