The Italian real estate market, known for its stability and cultural emphasis on family ownership, has historically been resilient to financial crises. Despite challenges like insufficient social housing and construction quality issues, the market faced an unprecedented shock with the COVID-19 pandemic in 2020. This led to an initial decline in transactions and a short-term fall in housing prices. However, the market made a strong rebound in 2021 and 2022, largely due to proactive government stimulus measures.
This report will examine how Italian real estate law and market dynamics have adapted in the post-pandemic era, focusing on legislative responses, shifts in legal practice, sustainability, and evolving investment patterns.
I. The Pre-Pandemic Foundations
Overview of Key Legal Frameworks
The Civil Code underpins Italian real estate law, regulating property rights and transfers. Transfers require a written deed before an Italian notary, ensuring compliance and removing the need for title insurance.
Commercial and residential leases are governed by Law No. 392/1978 and Law No. 431/1998, respectively. Zoning and planning involve national, regional, and municipal rules, with municipalities overseeing development.
Financial aspects are governed by banking and lending decrees. Sellers must guarantee clear title, cadastral compliance, and valid permits. Buyers conduct due diligence, including a 20-year notarial report.
Property transfers incur cadastral, mortgage, and registration taxes, varying by property type.
Market Characteristics and Investment Trends Before 2020
Before 2020, Italy had a high homeownership rate (72%), driven by a cultural view of property as a family asset. This contributed to market stability, avoiding severe crises seen elsewhere. The market included a significant luxury segment, with total real estate assets estimated at €5,000-€10,000 billion in 2024, potentially reaching €16 trillion by 2025. Italy welcomed foreign investment with no restrictions, attracting capital from Germany and the UK. The residential sector dominated, while commercial real estate was valued at €900 billion in 2020, with Northern Italy being a key investment region. The market was in an expansionary cycle in late 2019, just before the pandemic struck worldwide.
Despite stability, vulnerabilities existed, such as illegal construction of low-quality dwellings and poor tenant protection in the private rental market following 1990s liberalization. These structural weaknesses, though not crisis-inducing, became areas of focus for post-pandemic reforms, especially concerning sustainability and digital transparency.
II. Navigating the Crisis: Immediate Legal and Economic Responses to COVID-19 (2020-2021)
Emergency Legislative Measures: Moratoriums, Corporate Solvency, and Debt Relief
The pandemic prompted swift legal and economic interventions to stabilize the Italian economy.
Immediate responses included temporary restrictions on commercial landlords, such as a moratorium on lease forfeiture and limits on statutory demands and winding-up petitions. The “Decreto Liquidità” (Law Decree no. 23 of April 8, 2020) suspended Debt-to-Equity Ratio Rules for joint-stock companies. This decree was extended into 2025 and 2026 to prevent compelled liquidations and protect directors from liability. Directors still had to identify losses and report to shareholders.
Further support included moratoriums for SMEs and “Garanzia Italia,” a state-backed guarantee facilitating access to financing for personnel, investments, and rent/loan payments. Property transaction formalization was temporarily suspended in some regions due to Property Register closures. Tax deadlines were also suspended, and the “first house tax reduction” term was extended. The government also expanded its “Golden Power” investment screening authority to protect Italian companies from opportunistic foreign takeovers, extending it to EU-based investors and all strategic sectors. These legal changes acted as a critical shock absorber, linking legal stability with economic viability.
Fiscal Interventions: Tax Credits and Incentives for Businesses and Property Owners
A 60% tax credit was introduced for rent paid in March 2020 by retail shops (cadastral category C/1) whose activities were suspended, providing direct financial relief and liquidity. A broader 60% tax credit on monthly rent for business-related immovables was available for eligible entrepreneurs and professionals for March, April, and May 2020, with hotels benefiting regardless of revenue.
Businesses received a 50% tax credit (capped at €20,000) for sanitizing their premises in 2020. The Superbonus 110% and Facades Bonus offered unprecedented tax credits (110% for energy-efficiency/seismic renovations, 90% for facade redecoration) for residential buildings, transferable to third parties. These schemes generated an estimated €116 billion in additional investment. New funds also supported businesses forced to close.
Table 1: Key Government Fiscal Incentives for Real Estate (Post-Pandemic)
| Incentive Name | Purpose/Focus | Key Features/Deduction Rate | Eligibility/Target | Period of Application | Impact and Significance |
| 60% Rent tax Credit (C/1) | Commercial Rent Relief | 60% tax credit on rent | C/1 Commercial properties whose activities were suspended | March 2020 | Direct financial relief, liquidity support for retail |
| Broader Business Rent Tax Credit | Commercial Rent Relief | 60% tax credit on rent (30% for service agreements) | Entrepreneurs, professionals (<€5M Revenue); Hotels/Holiday farms (no revenue limit) | March, April, May 2020 (Seasonal; April, May June) | Broader financial support for businesses |
| Sanitization on Tax credit | Workplace safety | 50% tax credit (Max €20,000) | Businesses and Professionals | 2020 | Encouraged safe business reopening |
| Superbonus 110% | Energy efficiency, seismic upgrades | 110% tax credit transferable | Residential buildings | 2020-2023 (With later adjustments) | Stimulated significant additional investment (€116B), fostered modernization. |
| Facades Bonus | Facade redecoration and repair | 90% tax incentive | Residential buildings | 2020-2023 (With later adjustments) | Enhanced building aesthetics and value |
| Bonus Ristrutturazione | General building renovations | 50% (main homes), 36% (tax deduction (Max €96,000) | Owners/holders of real rights on residential units | 2025 (decreasing rates in 2026/2027) | Ongoing support for property improvements |
| Ecobonus | Energy efficiency upgrades | 50% (main homes), 36% (others) tax deduction | Existing property units and buildings in Italy | 2025 (decreasing rates in 2026/2027) | Encourages energy savings and environmental compliance |
Contractual Adaptations: Force Majeure and Renegotiation in Lease and Construction Agreements
The pandemic impacted contractual relationships, particularly concerning “supervening impossibility of performance” (Articles 1256, 1463, 1464 CC). A March 2020 law mandated courts to consider COVID-19 restrictions when evaluating breach of contract, generally favoring the non-fulfilling party. Construction activities were suspended, leading to delays and increased health/safety costs, addressed by emergency regulations. In non-residential leases, tenants sought rent reductions. While initial court decisions varied, a principle of “renegotiation in good faith” emerged. Many preliminary real estate contracts were also renegotiated due to changing buyer economic conditions.
III. Post-Pandemic Evolution: Enduring Shifts in Law and Practice (2021 Onwards)
Digital Transformation of Real Estate Transactions: E-Signatures, Virtual Viewings, and Notarial Practices
Crisis responses led to lasting transformations in Italian real estate law, focusing on modernization, efficiency, and sustainability. The pandemic accelerated digital adoption, making online platforms for virtual tours and digital communication essential. Italy has an advanced digital identity and electronic signature framework, adhering to eIDAS Regulation (EU No. 910/2014) and national Digital Administration Code (CAD).
Italy recognizes Simple (FES), Advanced (FEA), and Qualified (FEQ) Electronic Signatures. FEQ has the highest legal validity, equivalent to a handwritten signature, and is required for government transactions, high-value contracts, and some notarial acts. FEA is enforceable, while FES may need additional proof. While robust, some documents (e.g., wills, specific notarized real estate transactions) still traditionally require handwritten signatures. Notary offices adapted with remote consultations and Power of Attorney services, and real estate agents facilitated online checks.
Table 2: Electronic Signature Framework in Italy for Real Estate Transactions
| Signature Type | Legal Basis | Legal Validity/Evidentiary Weight | Key Requirements | Common Use Cases (General) | Relevance to Real Estate Transactions |
| Simple Electronic Signature (FES) | eIDAS, CAD | Legally valid, may require additional proof in disputes | Basic electronic data linked to signatory | Low-risk contracts, consent forms | Limited for notarized property transfers, valid for preliminary communications |
| Advanced Electronic Signature (FEA) | eIDAS, CAD | Legally enforceable, equivalent to handwritten in many cases | Uniquely linked, capable of identifying, signatory control, detectable changes | Commercial agreements, employment contracts, business transactions | Valid for many preliminary agreements, internal documents |
| Qualified Electronic Signatures (FEQ) | eIDAS, CAD, Civil Code | Fully enforceable, full evidentiary weight, legally equivalent to handwritten signatures | Issued by Qualified Trust Service Provider (QTSP), created using Qualified Signature Creation Device (QSCD) | Government transactions, high-value contracts, legal documents requiring full evidentiary weight | Required for final notarized deeds where digital execution is permitted, high-value contracts |
Judicial System Reforms: Streamlining Disputes and Promoting Alternative Resolution Mechanisms
Italy’s legal system, historically criticized for lengthy proceedings, has undergone reforms. The “Cartabia Reform” (Legislative Decree No 150 of October 10, 2022) aims to simplify procedures, digitize the justice system, and promote Alternative Dispute Resolution (ADR).
The use of “Accertamento Tecnico Preventivo” (ATP) has increased, allowing early court-appointed expert assessments to facilitate amicable settlements in technical disputes. ADR methods are increasingly used for technical property disputes, offering quicker and more cost-effective resolutions. The pandemic also spurred remote mediation via video calls. These reforms, supported by Italy’s National Resilience and Recovery Plan (NRRP) with EU funds, aim to boost investor confidence by promising faster, more predictable legal outcomes.
The Green Imperative: Incentives for Sustainable Building and ESG Compliance
The Italian real estate market is increasingly influenced by EU ESG regulations, including SFDR (EU 2019/2088) and EU Taxonomy (EU 2020/852), which aim to direct capital towards sustainable investments. The EU’s “Green Homes Directive” aims to reduce greenhouse gas emissions and achieve climate neutrality, increasing demand for energy-efficient properties.
Beyond Superbonus, schemes like Bonus Ristrutturazioni and Ecobonus continue to offer substantial tax deductions for energy efficiency, seismic upgrades, and renovations, improving Italy’s building stock. Favorable “green mortgages” are also gaining popularity, offering lower interest rates and higher financing for energy-efficient properties. Properties with high energy efficiency ratings command a premium of approximately €500 per square meter. Italy’s NRRP further commits €16.9 billion to energy efficiency in buildings and streamlines renewable energy permitting. The pandemic, combined with EU pressure, accelerated the transformation of Italy’s building stock towards higher quality, energy efficient, and sustainable properties.
Evolving Investment Landscape: Shifting Demand, Foreign Capital, and Urban Renewal Initiatives
Post-pandemic, residential demand shifted towards larger homes with private outdoor spaces. After an initial decline in 2020, the market recovered strongly, with total Italian real estate assets estimated at €16 trillion in 2025. Investment purchases, though slightly cooled in 2024, remain historically strong at 19% of transactions.
Major metropolitan areas like Naples, Palermo, Verona, Bari, and Florence remain investment hotspots. Foreign investment significantly increased from 4.1% in 2019 to 9.5% in 2024, with contributions from Germany, the US, and the UK. Mid-career professionals and families (72.2% of buyers) are the most active investors. Cash purchases dominate, but mortgage financing is recovering.
Extensive urban renewal plans, such as Milan’s $1.2 billion initiative, are transforming neighborhoods and driving demand for modernized, energy-efficient properties. Tenant-friendly policies, including Certificate of Habitability requirements and rent reductions for disruptions, contribute to market stability. Tighter regulations on short-term rentals, like Venice’s 120-day annual cap, encourage long-term leases with favorable tax regimes. The corporate real estate sector has seen consistent growth, with foreign investments forming the largest portion. New asset classes like student accommodation, logistics, and data centers are emerging as “rising stars” for investors. The pandemic prompted a strategic re-evaluation of real estate value, diversifying investment and aligning it with evolving societal and economic functions.
IV. Key Legal Trends and Future Outlook
Continued Emphasis on Sustainability and Energy Efficiency
Strong EU regulatory impetus (SFDR, EU Taxonomy, Green Homes Directive) will continue to drive sustainable investments and green building practices. Sustainable properties will remain a key investment focus, commanding a market premium. Government support for renovations and green construction is expected to continue, aligning with national and EU climate goals. ESG criteria will be increasingly embedded in real estate valuation, investment strategies, and due diligence, influencing market liquidity and asset attractiveness.
Adaptation to New Market Demands and Investment Patterns
Demand for larger homes with private outdoor spaces is likely to persist. Growth in alternative asset classes like logistics, data centers, and specialized “living sector” properties will continue, driven by macro trends. Ongoing urban renewal projects, especially in major cities, will create significant investment opportunities in modernized, mixed-use developments. Italy is expected to remain an attractive destination for foreign property buyers, with continued growth in international investment, bolstered by streamlined legal processes.
The future of Italian real estate law will be shaped by the interplay of proactive government policy, accelerating technological adoption, and evolving market demands. Government policies (NRRP, green building incentives, judicial reforms) are explicitly molding the market. Digitalization is gaining legal recognition and integrating into transactional practice. The market is responding with shifting demands for new property types and attributes. Legal professionals will need to advise clients on leveraging digital tools, ensuring compliance with ESG and urban planning regulations, and adapting investment strategies to new market preferences, shifting from reactive problem-solving to proactive strategic advisory.
Given its substantial investment in green building incentives and advanced digital legal infrastructure, Italy is uniquely positioned to lead in sustainable and digitally-enabled real estate. Its aggressive tax incentives for energy efficiency and seismic upgrades, combined with a robust e-signature framework and digitized judicial system, represent a massive modernization effort. This strategic alignment, reinforced by the NRRP, could transform Italy into a global benchmark, attracting new foreign investment seeking both yield and strong ESG compliance.
Conclusion: Opportunities and Challenges in Italy’s Resilient Real Estate Sector
The Italian real estate legal landscape has profoundly transformed post-pandemic, moving from immediate crisis responses to long-term structural changes. These include comprehensive digitalization, significant judicial reforms for efficiency, and a strong commitment to sustainability and energy efficiency, driven by national incentives and EU mandates.
This evolution offers compelling opportunities for investors and developers in urban renewal, green properties, foreign investment, and streamlined legal processes. Diversification into alternative asset classes like logistics and specialized living sectors also presents new growth avenues.
Challenges remain, including navigating bureaucracy, ensuring compliance with evolving regulations (e.g., tax incentives, zoning), and adapting to dynamic market demands and financing options.
In this complex environment, expert legal guidance is essential. A law firm with deep expertise in Italian real estate law is uniquely positioned to assist clients in navigating these evolving landscapes, offering strategic advice on compliance, transactional efficiency, dispute resolution, and capitalizing on emerging opportunities in Italy’s resilient and forward-looking real estate sector.
