The Denormandie scheme: how does it work?

Introduced on 1 January 2019, the Denormandie Act is a tax incentive scheme linked to rental investment in older property. It follows the Pinel Act, introduced in 2015 through the Finance Act. In the long term, the objective is to encourage rental investment in town centres where older properties are deteriorating. The target towns for this scheme are medium-sized towns that are deteriorating over time.

Who is the target?

You must have acquired an older property and aim to rent it out quickly. The purchaser must cover works worth 25% of the total operation, meaning works, notary fees and acquisition costs included. Furthermore, the property must be among the 222 towns eligible for the Denormandie scheme. You can find these towns on the cohesion-gouv.territoires.fr website.

What are the conditions for application of the scheme?

The property must be let unfurnished, as a primary residence. However, this must comply with a rent ceiling and an income ceiling. The ceilings are calculated according to the zone of the property in France and the town itself. For income, the composition of the rent is also taken into account.

The renovation works must either improve the property’s energy performance by at least 30%, or represent 2 types of work out of 5 from the following: roof insulation, boiler replacement, wall insulation, window insulation, hot water production replacement.

What are the advantages of this scheme?

The tax advantages vary according to the rental period of your property:

• Tax reduction of 21% of the property price for a rental period of 12 years (9 + 3 extended)
• Tax reduction of 18% of the property price for a rental period of 9 years
• Tax reduction of 12% of the property price for a rental period of 6 years

The tax advantage is capped at a maximum investment of £300,000 and 2 investments per year. Thus, the tax reduction can amount to up to £63,000 per year.

Furthermore, the 222 towns are often medium-sized towns where rental demand is very strong. The variety of rental properties allows everyone to invest according to their objectives: from student studios to large flats.

Advice regarding this scheme

Invest in a region you know. The towns eligible for the Denormandie programme are medium-sized and thus do not have a national reputation. It is important to know the region and its surroundings well to avoid investing unnecessarily (for example: investing in student accommodation when there are no universities nearby). Furthermore, as the principle of the scheme is to renovate older property, it is preferable to buy near your main residence. It will be easier to intervene in the event of difficulties encountered during works. Contact with potential local tradespeople will be more straightforward.

Among the towns to prioritise, Mulhouse, Melun, Bastia, Besançon or Cognac can be mentioned.