* Tax breaks eyed to revive flagging home construction
* New housing starts weakest since 1998, weighing on growth
PARIS Aug 29 The French government is set to
unveil plans on Friday to revive the struggling housing sector,
its second set of measures in three months and a response to
criticisms of policies to date that are seen to have discouraged
Promises in June to slash red tape on home-builders and ease
conditions for interest-free loans have done little to reassure
a sector which is a big employer in the euro zone's
second-biggest economy, and which has been battered by policy
switches and uncertainties since it took power in 2012.
With house construction still in decline, the Socialist
government has little choice but to increase tax breaks to
tackle a chronic housing shortage, even though it cal ill afford
them as it struggles to rein in its public deficit.
Among the measures to be announced, the capital gains tax
regime on property will be eased in order to encourage owners to
free up more land for new homes, according to a government
Much to the concern of builders like Bouygues and
developers like Kaufman and Broad, new home sales fell
by 15 percent in the second quarter over one year, according to
the FPI property developers association.
With housing starts at their weakest level since 1998, the
sector's slump is also choking economic growth, which stagnated
in both the first and second quarters in part because of
collapsing household investment in new homes.
Developers and builders say the situation has been worsened
by a new law that entered force in March this year, vastly
increasing paperwork during home sales and requiring rent limits
in particularly tight markets like Paris.
Facing a hail of criticism, the government in June was
forced to drop a campaign pledge it would build 500,000 new
homes a year, adding to a litany of broken promises that has
made President Francois Hollande the least popular president in
modern Frend history.
At the same time it pledged to would cut regulations holding
back construction and revive interest-free loan schemes for
"A climate of confidence needs to be rebuilt for investors,"
Bouygues chief executive Martin Bouygues, told journalists on
"One of the big problems we have in France is that we have
to live with ... tax, legal and social insecurity as each
government is constantly changing the rules," he added.
The property developers association says that investors have
deserted the market over the last two years. Plans to limit
rents in some cities have only added to their concerns.
In response, the government aims to increase tax breaks for
property owners who rent out apartments or homes for long
periods, according to industry sources.
Housing investment graphic: link.reuters.com/jah69v
French house prices: link.reuters.com/tyx36t
(Reporting by Gregory Blachier and Leigh Thomas, Additional
reporting by Natalie Huet; Editing by Andrew Callus)