Federal Chancellor Friedrich Merz has announced the completion of the draft for the planned Investment Protection Act. In the view of the real estate sector, the initiative represents an important signal, but is currently overshadowed by internal disputes within the governing coalition. At the centre of the controversy are considerations over whether compensation rates should be set at 80 or 100 per cent of market value.
Criticism of debates on compensation rates
Dirk Wohltorf, President of the German Real Estate Association IVD and Chairman of the Federal Working Group of the German Real Estate Industry (BID), clearly criticised the discussion concerning percentage discounts. He stated that anyone disputing compensation rates between 80 and 100 per cent fails to recognise the true purpose of the law, which is about the unrestricted confidence of investors. The protection of private property must not be treated as a bargaining chip or offset against concessions in other areas as part of political bartering.
The BID is demanding full compensation at market value for state interventions, which must be provided promptly and in cash. However, the association sees no compelling need to enshrine a fixed percentage in the statutory text. The decisive factor is that the regulation ensures complete, reliable and legally certain compensation in practice.
Location security and capital for residential construction
According to industry representatives, the debate touches upon fundamental location factors. The reliability of government commitments and legal certainty are elementary prerequisites for stabilising the confidence of both domestic and international investors, which has already suffered noticeably.
- —Full value compensation: Immediate monetary compensation based on the actual market value.
- —Legal certainty: Reliable and complete protection without coalition-political qualifications.
- —Confidence in the location: Protection of private property as a fundamental prerequisite for investment in housing construction.
To mobilise private capital for urgently needed residential construction, the Federal Government must not permit any doubts regarding the eligibility of private property for protection. Otherwise, the actual objective of the law threatens to become lost in political petty squabbling.
Wohltorf called for a swift adoption of the Investment Protection Act. Any further delay works against those actors who are expected to implement construction projects and create jobs in Germany.
