Portugal’s Construction Crisis: Why 94% of Urban Projects Are Illegal

Between 2020 and 2024, the General Inspectorate of Agriculture, the Sea, the Environment, and Spatial Planning (IGAMAOT) evaluated 1,312 urban operations across 59 municipalities in Portugal. A staggering 94% of these projects were found to have illegalities. This revelation underscores the pervasive issue of unlicensed construction in the country.

Consider two hypothetical developers: João and Maria.

João, eager to capitalize on the booming housing market, bypasses the lengthy licensing process, constructing several apartments without proper permits. Initially, his profits soar, but soon, authorities catch wind of his unauthorized projects, leading to hefty fines and potential demolition orders.

Maria, on the other hand, painstakingly navigates the bureaucratic maze, ensuring every permit and regulation is meticulously followed. Her project takes longer to complete and incurs higher upfront costs, but her buildings stand as a testament to legal compliance, attracting reputable investors and long-term gains.

In municipalities like Mira, Almeirim, and Ferreira do Zêzere, inspections revealed 100, 81, and 76 illegal operations respectively. These numbers highlight regions where unlicensed construction is particularly rampant.

Impact on Various Sectors

• Real Estate Market: Unlicensed constructions can flood the market with substandard properties, leading to potential devaluation of surrounding legally built properties.

• Financial Institutions: Banks may face increased risks when providing loans for properties that might later be deemed illegal, affecting their asset portfolios.

• Construction Industry: Legitimate builders adhering to regulations may find themselves at a competitive disadvantage against those cutting corners, potentially leading to unfair market dynamics.

If the current trend continues, Portugal may face significant challenges:

• Urban Planning Chaos: Widespread illegal constructions can lead to haphazard urban development, straining infrastructure and public services.

• Legal Backlogs: The judiciary could become overwhelmed with cases related to unlicensed buildings, delaying justice and resolution.

• Investor Hesitation: Perceived regulatory laxity might deter foreign investors seeking stable and predictable markets.

Our Recommendations for Expats and Investors -

1. Due Diligence: Before purchasing property, ensure all necessary licenses and permits are in place.

2. Engage Professionals: Consult with local legal experts and real estate agents familiar with Portuguese regulations.

3. Stay Informed: Keep abreast of local news and government announcements regarding urban planning and construction laws.

4. Advocate for Transparency: Support initiatives and policies that promote clear guidelines and accountability in the construction sector.

For those navigating the complexities of the Portuguese real estate market, our trusted partners offer services to guide you: From Legal Consultation, through Real Estate Advisory, and Financial Planning, the Burtucala business community got you covered.

By leveraging their expertise, you can make informed decisions and ensure your investments are both profitable and compliant.