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14 July, 2024
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KEDIPES prepares 60 million euro 'Mortgage-to-Rent' initiative

Efforts to reduce non-performing loans remain in focus

Panayiotis Rougalas

Panayiotis Rougalas

The sale of primary residences worth up to 350 thousand euros faces a potential new suspension. As of the end of October, no additional steps have been taken regarding divestments.

Lawmakers are considering extending the suspension due to its previous lack of productivity. This extension will impact the "rent versus installment" plan, set to launch within the next two weeks during this suspension.

This development may convey the message that borrowers facing problems can delay resolution rather than solving them.

This situation represents a long-awaited project discussed for the past three years, with support from the European Commission and an operational body, KEDIPES.

However, the timing is less than ideal, as crucial components, such as the "special court," the powers of the Financial Commissioner, and the central bank mechanism, have been sidelined since two laws were passed in July to improve divestment procedures.

The "rent versus installment" Plan has now reached a significant level, much like the "Estia" plan did four to five years ago. KEDIPES is prepared to implement the mortgage-to-rent plan, allocating 60 million euros for this purpose.

Approximately 300 employees will carry the social responsibility of this endeavor. The project is expected to involve 1,250 primary residences from banks and credit buyback companies and another 1,250 from KEDIPES.

Realistically, around 800 homes valued at 180 million euros are likely to participate, with an estimated expenditure of 13 million euros for repairs.

For KEDIPES' portfolio, debt-to-asset operations are expected to be cost-neutral. A similar 13 million euros is allocated for repairs, and around 9 million euros for charges. KEDIPES already has the 60 million euros required for banks and servicers.

Looking at the annual cash flow, rents for banks/servicers will reach 2.6 million euros, while costs are estimated at 1.9 million euros. Similar rent and expense data are expected for the KEDIPES portfolio. According to official analysis, the return on these properties for KEDIPES will be 2%.

Regarding unresolved issues from the past four months, a mutual clash is anticipated. The special court, the Financial Commissioner's body, and the central mechanism will become entangled in determining specific amounts owed by borrowers, potentially causing further complications.

Institutions are closely monitoring these developments, with the European Central Bank expressing concerns about legislative proposals that could hinder the resolution of non-performing loans.

They emphasize the importance of maintaining strong legal frameworks and quick court procedures to reduce NPLs effectively. Such measures are crucial for banks to maintain loan volumes and healthy balance sheets, ultimately supporting the overall economy.

[This article was translated from its Greek original]

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