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Ben Kingsley Blog post by Ben Kingsley

What is NRAS?

The National Rental Affordability Scheme (NRAS) is a long term commitment by the Australian Government to invest in affordable rental housing. The Scheme seeks to address the shortage of affordable rental housing by offering financial incentives to the business sector and community organisations to build and rent dwellings to low and moderate income households at 20 per cent below-market rates for 10 years. NRAS aims to:

  • increase the supply of new affordable rental housing;
  • reduce rental costs for low and moderate income households; and
  • encourage large scale investment and innovative delivery of affordable housing.

The Australian Government has committed $1 billion to the Scheme over four years to stimulate construction of up to 50,000 high quality homes and apartments, providing affordable private rental properties for Australians and their families.

 

So what does NRAS mean for Property Investors?

Because NRAS aims to encourage large-scale investment in affordable housing, NRAS Incentives cannot be applied for by small-scale, individual investors. Instead, individuals who are interested in purchasing just one or two NRAS properties as an investment can become involved by approaching entities that are applying or already have a larger allocation of NRAS Incentives.

Entities operating as investment vehicles for small-scale investors might be superannuation funds, property trusts or consortiums with many individual investors taking part. NRAS applicants include institutional investors, individual investors, private developers and not for profit housing providers that build, own and manage NRAS dwellings.

Source :www.fahcsia.gov.au

 

The idea behind the scheme is a good one, as it is trying to address the housing shortage and provide quality accommodation for low to middle income earning people.

The tax offset incentives are designed to encourage larger investment institutions etc, but what has happened is developers and property promoters are also now in the game and are promoting these investments to individuals via Joint Venture or Lease Agreement Arrangements.

The challenge for the investor is three fold:

1 – They need to determine who of these promoters are legitimate and have your best interest in mind in making these recommendations to buy these properties (especially given they profit from selling them to you—so there is a direct conflict of interest in recommending them as an investment)

2 – Under the contract of sales what rights of ownership do you actually have?

3 – The Tax office is still working on a decision regarding if the tax offset are applicable to the individual purchaser

4 – Bank and lenders are not happy with the Contrast in terms of it all going pear shaped and them getting their money back.

 

Finally, they need to deliver on capital growth and to do that they need to be located in high income areas, so it’s important to get independent advice if you are thinking this might be for you.

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