Portugal's New Licensing Simplification Plan Meets Skepticism from Real Estate Experts

A new government proposal aimed at further simplifying Portugal's notoriously complex property licensing laws is being met with significant skepticism and criticism from leading legal and development experts. While the plan ambitiously aims to drastically cut decision times for new projects, critics warn it is poorly conceived and could paradoxically introduce more uncertainty, encourage defensive obstruction from municipalities, and push developers towards longer, more secure legal pathways—especially for large-scale projects requiring bank financing. This development has profound implications for foreign investors banking on a more agile Portuguese real estate market.

The proposed changes come hot on the heels of the January 2024 'Simplex Urbanístico' reform, which was itself designed to streamline the RJUE (Legal Framework for Urbanization and Building). According to Rui Ribeiro Lima, a respected partner at the law firm Morais Leitão, the new revision seeks to aggressively reduce deadlines for construction works to 70 days and for subdivision operations to between 65 and 95 days. However, he immediately cautioned, “the mere reduction of procedural deadlines is no guarantee that they will actually be respected.” This sentiment was echoed by other experts who fear the unrealistic timelines will be counterproductive. For investors, navigating these complex and shifting legal issues remains a primary challenge in the Portuguese market.

This constant legislative tinkering creates a highly unstable and unpredictable environment for developers and foreign investors, who rely on stable frameworks to plan and execute multi-year, capital-intensive projects. The consensus among professionals is that the government is chasing headlines by addressing symptoms—the slow pace of approvals—rather than the root causes of the delays, which are deeply embedded in Portugal's administrative culture. For more analysis on policy, visit our policy analysis blog.

Market Implications: The Perverse Effect on Investment and Financing

The most controversial and potentially damaging proposal is to make the 'comunicação prévia' process optional, allowing developers to choose the full, traditional licensing path even for projects that qualify for the faster route. While this appears to offer flexibility, market experts argue it will have the opposite effect in practice. Mariana Arrochella Lobo, CEO of the developer ARC Homes, provided a critical insight from the developer's perspective: “Any promoter who resorts to construction financing will have a problem whenever there is a duality in the process. In that case, they will have to opt for the more complicated path that gives them a title of legal security.”

This creates a significant, tangible risk for investors and the market at large. Banks and institutional lenders require a formal, indisputable license to release funds for construction. Faced with an optional, less robust notification process, they will almost certainly demand developers secure a full license. This means developers will be compelled to choose the slower, more bureaucratic process, completely defeating the purpose of the simplification effort. This could add months or even years to project timelines, increasing financing costs and delaying the delivery of much-needed housing. Investors must consult with English-speaking real estate lawyers to fully grasp the implications for project structuring and financing.

Furthermore, architect Pedro Baganha, the influential former Councilor for Urbanism in Porto, warned of a “defensive reaction” from municipal bodies. “The shorter and more unrealistic the licensing deadlines are, the more municipalities will find pretexts to gain time or block processes,” he stated. This could lead to an increase in procedural challenges, requests for clarification, and outright rejection on minor grounds, further bogging down the system in the name of simplification.

A Frustrating History of Legislative Instability

Pedro Baganha also delivered a powerful critique of the cyclical and seemingly ahistorical nature of these reforms, which contributes directly to market instability. “This upcoming change to make prior communication optional again is exactly repeating the process of 2014,” he noted with exasperation. He explained that the process was made optional after its creation, then made mandatory again in 2024, and is now set to become optional once more. “Stop messing with the subject... this is unbearable for promoters, but also for the municipal machinery!” he appealed.

This legislative churn makes it nearly impossible for both private and public sector stakeholders to adapt, invest in new processes, and establish stable, efficient workflows. For foreign investors, it underscores the absolute necessity of having expert local partners, including top-tier real estate agencies and legal advisors, who can navigate the ever-changing and often contradictory regulatory landscape.

Broader Market Context: Seeing the Forest for the Trees

The panel of experts unanimously argued that the government's laser focus on the RJUE is myopic. Pedro Baganha powerfully contended that “to think that the problem lies solely and exclusively in the RJUE is to see the tree and not the forest.” The core problem, he argued, is not just the licensing deadlines but a systemic issue within Portugal's entire planning culture.

The key underlying problems that remain unaddressed include:

• Rigid and Outdated Planning Instruments: Portugal's territorial management plans (PDMs) are often inflexible, difficult to amend, and not conducive to modern, dynamic urban development, stifling innovation.
• Absence of a Collaborative Planning Culture: There is a deep-seated lack of a partnership-based approach between public authorities and private developers in defining urban parameters from a project's inception.
• Chronic Delays from External Bodies: The proposal fails to address the significant delays caused by the dozens of supra-municipal entities (e.g., for environment, heritage, infrastructure) whose binding opinions are required for projects.
• Excessive Bureaucracy Over Practicality: The system remains focused on bureaucratic box-ticking rather than focusing on the most critical step: the approval of a project's core urban parameters via a Preliminary Information Request (PIP).

Addressing these deeper, structural issues, the experts suggest, would be far more effective than simply “tinkering with deadlines.” For a deeper understanding of these local plans, investors can review our detailed analysis of the Lisbon Municipal Master Plan (PDM).

Strategic Investment Considerations

For investors, this legislative uncertainty reinforces the need for extreme caution, deep due diligence, and expert local advice. The proposed changes, particularly the optional nature of 'comunicação prévia', could inadvertently increase project risk, extend timelines, and raise costs. Developers and their financial backers will likely default to the most secure, albeit slowest, legal process, undermining the government's stated goal of accelerating housing supply. These are critical investment risks that must be proactively managed through strategic planning and legal structuring.

On a more positive note, a proposal highlighted by Rui Ribeiro Lima is the plan to reduce the statute of limitations for municipal inspections of completed projects from ten years to one, and similarly reduce the period for declaring a project null and void. This would provide greater long-term legal stability for completed and sold assets. However, the consensus remains that the market needs stability above all else. “We need to know what is required to license a project, what are the normal deadlines... only then will we be able to plan and execute,” insisted Mariana Arrochella Lobo.

Future Outlook: A Call for Stability Over Hasty Reforms

The overwhelming sentiment from Portugal's real estate professionals is a unified call for legislative stability and a more thoughtful approach to reform. Rather than introducing another sweeping and potentially flawed revision, experts strongly suggest it would be more prudent to correct the known lapses in the existing 2024 Simplex law and allow the market sufficient time to adapt and measure its true impact. The constant state of flux creates a challenging environment for bringing new housing to the market, which remains a critical economic and social need in Lisbon and across Portugal.

For investors, the landscape remains a complex chessboard, requiring deep local knowledge and sophisticated strategic planning to navigate the bureaucracy effectively. For expert guidance on property development, risk management, and the latest legal updates in the Portuguese market, contact realestate-lisbon.com.