In this article, we discuss the measures announced in Budget 2026 that will be relevant for the real estate industry and the residential developers and institutional investors within it.
Budget 2026 was prepared against the backdrop of an uncertain global economy but with an Irish economy that is set to grow by 3% in 2025 and into 2026. The total package announced was €9.4 billion, a decrease of €1.1bn compared to the 'give-away' Budget 2025 of €10.5bn.
Broadly speaking, the government's objectives for Budget 2026 were to boost housing supply, protect jobs and continue growth.
We await the publication of the Finance Bill and the Finance Act which will provide more detail on the measures announced and allow us to assess the potential extent of Budget 2026's impact on our clients' investment strategies and operations in Ireland. In the meantime, we've set out a list of the main measures relevant to the Irish real estate industry below.
VAT reduction for new apartment sales
The VAT rate on the sale of new apartments has been reduced from 13.5% to 9% effective from 8 October 2025 to 31 December 2030.
Financial Resolution No.4 was the legislative amendment to enact this VAT rate reduction. However, the wording used to describe the type of apartments this applies to was "the supply of an apartment used or to be used for residential purposes in an apartment block". We await clarity on how this will be worded in the Finance Bill. However, this definition provided in Financial Resolution No. 4 is ambiguous and it may restrict the application of the reduced VAT rate to large apartment blocks only.
Corporation tax exemption
Rental income deriving from cost rental developments is now exempt from corporation tax from 8 October 2025. This measure is directed at accelerating the delivery of affordable homes by making cost rental developments attractive to institutional investors and aligns with the government's policy to expand the cost rental sector.
There is an enhanced tax deduction for costs incurred during apartment construction, for developments of 10 or more apartments, new-build developments and the conversion of non-residential to residential property. This will apply to projects where commencement notices are issued between 8 October 2025 and 31 December 2030.
It may be claimed upon submission of a Completion Notice by a developer who is the beneficial owner of the property at the time of completion. Reducing the corporation tax payable on profits is a bid to tighten the viability gap that exists between apartment development costs and viable market prices, again incentivising development.
Out with the derelict site levy and in with the derelict property tax
A derelict property tax, implemented and collected by Revenue, will replace the derelict site levy. The rate is expected to not be lower than the current derelict site levy rate which is 7% of the market value of the property.
Legislation on the new tax will be introduced in 2026 with a preliminary register of relevant land to be in place in 2027 and implementation of the tax as soon as possible thereafter.
Redirecting the collection of the derelict property tax to Revenue (the derelict site levy is collected by local authorities) may encourage property owners to renovate or sell derelict properties and help to boost housing supply.
The residential zoned land tax (RZLT) exemption
The RZLT is an annual tax, calculated at 3% of the market value of the land in scope. The RZLT exemption is to apply where a landowner changes zoning of the land to reflect the genuine economic activity currently being carried out on the land which could be a welcome development for landowners, particularly farmers, who are potentially liable for RZLT. Legislation will be amended to provide for this in 2026.
Residential development stamp duty refund scheme
This scheme applies where non-residential land is subsequently developed for residential purposes and is to be extended to 31 December 2030. The scheme provides a partial repayment of the stamp duty paid on the acquisition of land where land is subsequently developed for residential purposes (subject to a number of conditions).
It is expected that the Finance Bill will introduce further amendments to the scheme, including:
- an extension of the time limits for large-scale residential developments from 30 to 36 months, for both the limit on the period from site acquisition to commencement and the time from commencement to completion
- for multi-phase developments, a refund will be available for the full site upon commencement of the first phase of development.
It is hoped this will encourage new and creative developments like regenerating 'over the shop' premises to be used as residential premises which will boost supply and the affordability challenges of doing so.
Other relevant measures
Irish Real Estate Funds (IREFs)
Minister for Finance Paschal Donohue said in his Budget 2026 speech that there is no intention to introduce entity-level taxation measures for IREFs and he has committed to undertaking a public consultation on proposals to simplify the IREF regime without limiting its effectiveness. These comments are welcome for investment funds who derive 25% or more of their market value from assets deriving their value from Irish land and similar assets (eg loans and shares). We look forward to seeing the shape and the results of the public consultation once it happens.
We will provide a further update on the Finance Bill and the Finance Act after they are published. However, as seen from the provisions outlined above, there's a clear theme for Budget 2026 – the Irish government is focused on supporting the housing market.
