Luxury real estate market in Tunisia: Constraints persist despite development ambitions

Since the introduction of the new VAT on real estate in 2019, the luxury real estate market in Tunisia has faced major challenges. While several property developers have sought to diversify their offerings by targeting the luxury segment, the current economic situation, characterized by a prolonged crisis, a decrease in the purchasing power of Tunisians, and an increase in construction material prices, has hindered the development ambitions of this market.
For decades, the Tunisian real estate market has been dominated by affordable and social housing primarily targeting the middle class, supported by government incentives to facilitate access to housing. However, the introduction of the new VAT in 2019 has led to an increase in construction and property acquisition costs, putting additional pressure on potential buyers.
The current economic crisis has also heavily impacted the demand for luxury real estate. In a context where many Tunisians are facing financial difficulties, the purchase of luxury properties has become less of a priority. The ongoing restrictions on property ownership for foreigners and high-net-worth individuals have also limited the interest of foreign investors in this segment.
Real estate experts highlight that luxury projects in Tunisia often do not meet the international standards observed in other countries, which can discourage foreign investors. Additionally, the increasing inflation of construction material prices has led to rising development costs, making it challenging to realize high-end projects.
Currently, the luxury real estate market in Tunisia represents only about 10% of the total supply. The majority of sales are focused on family homes targeting middle-income buyers, while luxury projects attract fewer clients due to the financial constraints of the market.
There are indeed a series of concerning issues that are increasingly raising concerns among buyers and investors. The constant changes in urban planning have often resulted in disorganized urban development, making it difficult to anticipate the future needs of the population. This phenomenon has led to a glaring shortage of green spaces, playgrounds for children, and pedestrian-friendly sidewalks. These urban shortcomings have a negative impact on the quality of life for city dwellers, limiting their recreational and outdoor activities while compromising their safety when sharing the streets with vehicles. Urgent reflection and long-term planning are necessary to address these issues and build more pleasant and resident-friendly cities.
To stimulate the luxury real estate market and overcome these challenges, it is essential to consider incentive measures such as tax benefits and administrative facilitation to attract foreign investors. Modernizing the real estate sector and reducing investment barriers could help revitalize this segment and improve the country's image in the international market. However, the implementation of such measures should be carefully balanced to avoid further compromising the country's economic situation and ensure sustainable development of the luxury real estate market in Tunisia.