Investment in legalisation versus property value: detailed economic analysis of the process

The legalisation of urban operations in Portugal is far more than just an administrative formality. It is a strategic investment that can determine the success or failure of a real estate project, with a direct influence on property appreciation and long-term economic returns. In a time when the Portuguese property market faces significant regulatory changes and inflationary pressure, understanding the cost-benefit ratio of legalisation is essential for owners, investors, and developers.

The current legalisation landscape in Portugal is complex, impacting the economic analysis of projects. Official data shows thousands of irregular buildings, many of them dating from before 1951, when the General Regulation of Urban Buildings (RGEU) came into force.

House in Almada after refurbishment, renovation, and extensions

Legal Framework

The Legal Regime for Urbanisation and Building (RJUE) sets out the procedures for resuming planning legality. It establishes that legalisation should be promoted whenever it is possible to ensure conformity with the regulations in force at the date of construction. Recent changes, including Decree-Law No. 10/2024 under the Simplex Urbanístico programme, have significantly simplified the procedures, replacing some licences with prior communications.

Effect on Property Value

Legalisation yields measurable economic benefits that usually justify the initial investment. Studies indicate:

• Immediate value uplift: Residential property sees an average 15–25% increase in market value; commercial properties, 20–35%; urban plots, 40–60%

• Medium-term benefits: Easier access to bank loans, removal of demolition or fine risks, and greater scope for alterations or expansion

• Case example: A house in Greater Lisbon increased from €180,000 to €220,000 after legalisation, with an ROI of over 500%

Economic Impact Beyond Valuation

Legalisation provides non-immediate economic advantages, such as improved fiscal optimisation, correct property tax alignment, and better access to finance for improvements or development projects. Not legalising can subject property owners to fines, forced demolition, and litigation.

Practical Guidance

Legalisation is most economically advantageous when aligned with periods of regulatory simplification and favourable market conditions. Approaching timing strategically, conducting comprehensive audits, and working with qualified professionals maximise returns. Grouping legalisation processes and coordinating with structural renovation or local support programmes can further optimise costs.

Macroeconomic Impact

Mass legalisation stimulates the property sector, increases state and municipal revenues, and fosters urban regeneration. The process supports property inventory activation and job creation, with legal properties representing 60% of secondary market transactions in Portugal.

Risks and Limitations

Although legalisation is generally cost-effective, certain situations—such as mandatory major demolitions or regulatory incompatibility—may render it non-viable. Timelines can range from 3 to 36 months depending on the case, and owners should consider opportunity costs during the process.

Strategic Outlook

With regulatory changes increasingly favouring simplification, legalisation stands out as one of Portugal’s most secure and profitable real estate investments, consistently delivering high ROI and strategic advantages. In an increasingly regulated market, compliance is not only a legal obligation but a significant competitive edge, making swift legalisation advisable for all owners and investors.

House after completion of works, view of the interior of the upper floor

Risks and limitations of investment

Negative ROI scenarios

Despite generally high returns, there are situations where legalisation may not be economically viable:

• Partial demolition requirements exceeding 40% of the building’s area

• Incompatibility with planning regulations and territorial management instruments

• Upgrading costs disproportionate to the property’s base value

Risk mitigation:

• Seek early consultation with municipal authorities

• Carry out a detailed technical feasibility analysis

• Consider alternative permitted uses for the property​

Time constraints

Typical process durations:

• Simple legalisation: 3–6 months

• Complex cases: 8–18 months

• Litigious matters: 24–36 months

Opportunity costs:

• Capital immobilisation during the process

• Inability to sell the property in the interim

• Depreciation due to uncertainty over timeline

Practical advice for maximising return

Essential preparation

• Conduct a comprehensive initial audit

• Carefully document the current legal status

• Identify all non-compliance issues

• Compare costs against potential benefits

Select qualified professionals

• Architects specialised in legalisation

• Lawyers with expertise in urban law

• Consultants familiar with local regulations

Cost optimisation strategies

• Bundle similar legalisation processes

• Negotiate for overall fixed professional fees

• Re-use existing technical documentation

Financial planning

• Spread payments throughout the process

• Use preferential seasonal conditions

• Align legalisation with the property’s revenue streams​

Market outlook

Regulatory trends

Recent legislation aims to continuously simplify legalisation processes, positively affecting the cost-benefit ratio:

• Average 30% decrease in approval timelines

• 25% reduction in administrative costs

• Greater process predictability

Property market developments

• Rising scarcity of legalised properties

• Increasing regulatory pressure on irregular buildings

• Introduction of government support for legal housing

Key takeaways

A detailed economic analysis of the investment-value pair in legalising urban operations reveals a distinctly favourable scenario in most cases. With average ROIs above 400% and consistent property value increases of 15–35%, legalisation is one of the safest and most profitable opportunities in Portugal’s property market. The removal of regulatory risk, easier credit, and enhanced commercial viability give legalisation strategic value beyond financial indicators. In an increasingly regulated and competitive market, legal compliance is not just a duty but a key business advantage. The cost of not legalising typically outweighs the necessary investment. With a tightening legislative framework and market pressures, the window for favourable legalisation may be closing. The future of Portugal’s real estate market will be focused on legalised properties—those who act now will benefit most from increased value and reduced irregular competition.