Urban Rehabilitation Areas (ARU) and Urban Rehabilitation Operations (ORU) in Portugal

In Portuguese cities, many older buildings and public spaces suffer from degradation or obsolescence. To address this challenge, the law has created instruments that encourage coordinated urban rehabilitation works: Urban Rehabilitation Areas (Áreas de Reabilitação Urbana – ARU) and Urban Rehabilitation Operations (Operações de Reabilitação Urbana – ORU).

An ARU defines territories where degradation is severe enough to justify a joint intervention. Subsequently, ORUs establish the action plan for that territory: which works are to be carried out, in what sequence, and under which incentives. These instruments aim to revitalise cities, increase energy efficiency, and improve quality of life in urban centres.

What is an ARU?

An ARU is an area of the city officially delimited by the Municipal Assembly where buildings, infrastructure, or urban spaces are degraded, unsafe, or obsolete. By designating an area as an ARU, the municipality formally acknowledges the need for integrated rehabilitation works.

The delimitation of an ARU also produces concrete legal effects: it requires the municipality to define local support measures and tax incentives for rehabilitation, such as reductions or exemptions from Municipal Property Tax (IMI) or Municipal Property Transfer Tax (IMT).

In summary, an ARU identifies priority areas for urban rehabilitation and provides the legal framework to attract public and private investment.

What is an ORU?

An ORU consists of the set of planned interventions within an ARU. If the ARU identifies where to act, the ORU explains how to act within that territory. It defines the types of works to be carried out (for example, façade rehabilitation, modernisation of building systems, upgrading of streets and public spaces, installation of lifts, etc.), who is responsible for their execution (private owners, the municipality, or public–private partnerships), and the applicable deadlines.

The approval of an ORU—usually through a municipal instrument or a specific detailed plan—structures and programmes interventions in a coordinated manner. Through the ORU, property owners are informed of the incentives available to them, and municipalities ensure that works comply with a single, integrated plan.

Legal Framework of ARU and ORU

The creation and operation of ARUs and ORUs are governed by the Legal Regime of Urban Rehabilitation (Regime Jurídico da Reabilitação Urbana – RJRU), approved by Decree-Law no. 307/2009 of 23 October. This framework was subsequently amended and republished by Decree-Law no. 66/2019 of 21 May, which updated management procedures, strengthened planning instruments, and clarified associated tax effects.

Under the RJRU, urban rehabilitation is defined as an integrated intervention in the existing urban fabric, preserving urban and real estate heritage while modernising it through construction, reconstruction, extension, alteration, conservation, or demolition works, as well as improvements to infrastructure and collective facilities.

The delimitation of an ARU and the approval of the corresponding ORUs fall within the competence of the Municipal Assembly, upon proposal by the Municipal Council, in accordance with Article 13 and subsequent provisions of the RJRU. The proposal must include:

• a descriptive and justificatory report;

• a map defining the territorial boundaries;

• a framework of associated tax benefits.

The ORU project must also include the strategic urban rehabilitation programme, the management model, the execution period, and the investment plan, pursuant to Articles 20 to 22 of the RJRU.

Benefits for Owners, Investors, and Communities

ARUs and ORUs provide several advantages:

1. Tax Benefits

These benefits are based on the Tax Benefits Statute (Articles 45, 45-A, and 71) and on the Financial Regime of Local Authorities (Law no. 73/2013, Article 16), which allows municipalities to approve IMI and IMT exemptions within ARUs.

• Reduced VAT: A reduced VAT rate of 6% applies to rehabilitation construction works on properties located in ARUs or integrated into projects recognised as being of public interest (Article 18 and item 2.23 of List I annexed to the VAT Code).

• IMI: Exemption for three years, renewable up to five years, for rehabilitated properties located in an ARU (Article 45 of the EBF).

• IMT: Exemption on the acquisition of properties intended for rehabilitation, provided works begin within a maximum period of three years. Exemption also applies to the first transfer after rehabilitation when intended for permanent rental or, if located in an ARU, for owner-occupied permanent housing (Article 45-A of the EBF).

2. Facilitated Financing

Investors may access special credit lines. IFRRU 2020 – the Financial Instrument for Urban Rehabilitation and Revitalisation – provides loans at reduced interest rates for comprehensive building rehabilitation projects located in ARUs. This financing also covers energy efficiency measures. IFRRU has already mobilised hundreds of millions of euros to revitalise cities, particularly supporting housing rehabilitation and the reuse of deactivated industrial spaces.

3. Urban and Economic Value Enhancement

Rehabilitation improves safety, comfort, and the aesthetic quality of historic neighbourhoods, attracting residents, commerce, and services. Renovated properties gain market value, benefiting owners and investors alike. At a local level, rehabilitation works generate employment in construction and related sectors. In degraded areas, rehabilitation helps prevent urban depopulation and reduces structural safety risks.

4. Social Impact

Projects within ARUs promote social inclusion and community cohesion. In more disadvantaged areas, rehabilitation contributes to economic revitalisation and job creation, helping to combat poverty. Rehabilitated neighbourhoods generally become safer and more pleasant places to live, improving overall quality of life. As stated by IFRRU, such investments act as “a lever for urban sustainability and for improving people’s quality of life”.

Practical Examples in Portugal

Several municipalities have successfully implemented ARU/ORU frameworks:

• Lisbon: Since 2012, a large part of Lisbon’s historic centre has been designated as an ARU. In 2024, the Municipal Assembly extended the duration of Lisbon’s Urban Rehabilitation Operation by up to 15 years, allowing continued interventions in the city centre. As a result, neighbourhoods such as Baixa, Alfama, and Graça have benefited from conservation and modernisation works supported by incentives, attracting new residents and strengthening local commerce.

Source: https://www.lisboa.pt/temas/urbanismo/reabilitacao-urbana/area-de-reabilitacao

• Porto: The Municipality of Porto has defined several ARUs/ORUs covering historic neighbourhoods. These operations introduce tax benefits for private rehabilitation and coordinate public investment. Areas such as Rua de Santa Catarina and its surroundings have undergone rehabilitation, benefiting from IMI exemptions and support for façade upgrades. The municipal company Porto Vivo has coordinated these projects, revitalising historic areas while preserving heritage.

sSource: https://portaldomunicipe.cm-porto.pt/documents/20122/1331869/3_Relatorio_ARU_BAIXA.pdf/7ace365f-9151-7c96-3ca7-91f92ccb98ab?t=1715680005479

• Amarante: After identifying degradation in its historic centre, the Municipality of Amarante designated four Urban Rehabilitation Areas in 2009. This enabled the application of local incentives and the alignment of rehabilitation projects for squares, streets, and historic buildings. As a result, parks and gardens were renovated and historic façades restored, making the city more attractive to residents and visitors.

Source: https://portaldomunicipe.cm-porto.pt/documents/20122/1331869/3_Relatorio_ARU_BAIXA.pdf/7ace365f-9151-7c96-3ca7-91f92ccb98ab?t=1715680005479

Many other municipalities across the country have followed this approach, often combining municipal planning, public funding, and owner incentives, frequently supported by European funds

How to Benefit from ARU/ORU Incentives

To take advantage of ARU/ORU incentives, owners or investors must follow several steps regulated by Articles 24 to 32 of the RJRU:

1. Confirm whether the property is located in an ARU: The first step is to verify whether the building lies within a designated area. The Housing Portal provides an online tool to consult active ARUs by municipality.

2. Plan the intervention as urban rehabilitation: When applying for a building permit, the project must be identified as urban rehabilitation and aim to improve the property’s conservation status by at least two levels. Once works are approved, the municipality issues an official “rehabilitation recognition” document, which is then communicated to the tax authorities to activate fiscal benefits.

3. Apply for tax incentives: With the approved project and official recognition, the owner applies to the tax authorities for IMI and IMT benefits. Depending on the ARU, full exemption or reduced municipal rates may apply.

4. Access financing and support programmes: Investors and developers may apply for IFRRU 2020 or other rehabilitation programmes, subject to specific requirements, including coordination with the municipality and compliance with eligibility criteria.

In summary, close coordination with the local authority and housing-related institutions is essential. Contacting the municipal planning department, consulting IHRU/IFRRU guidelines, and preparing a technically sound project are key steps to successfully benefit from available incentives.

Conclusion

Urban Rehabilitation Areas (ARU) and Urban Rehabilitation Operations (ORU) are powerful instruments for the recovery of Portugal’s urban fabric. They enable large-scale coordinated interventions, combining private and public works while attracting investment through tax incentives and accessible financing. As a result, historic neighbourhoods become safer and more liveable, contributing to job creation and urban vitality. As highlighted by the IFRRU programme, investment in urban rehabilitation acts as “a lever for urban sustainability and for improving people’s quality of life”. In practical terms, ARUs and ORUs transform degraded heritage into valuable assets, promoting economic and social development in Portuguese cities.

If you require an architectural project for urban rehabilitation, please contact MJARC and request a quotation.

Sources and Legal References

The information above is based on the Portuguese legal framework for urban rehabilitation, official guidance from the Housing Portal and IFRRU, publications in the Diário da República, and practical examples from municipalities such as Lisbon, Porto, and Amarante.
This information does not dispense with consultation of the applicable legislation, namely:

1. Legal Regime of Urban Rehabilitation (RJRU)
   Decree-Law no. 307/2009 of 23 October
   Decree-Law no. 66/2019 of 21 May
   Articles 13 et seq.; Articles 20–22; Articles 24–32

2. Tax Benefits Statute (EBF)
   Articles 45, 45-A, and 71

3. Financial Regime of Local Authorities and Intermunicipal Entities
   Law no. 73/2013, Article 16

4. Value Added Tax Code (CIVA)
   Article 18 and List I, item 2.23

5. Financial Programmes
   IFRRU 2020 – Financial Instrument for Urban Rehabilitation and Revitalisation