The Cyprus Housing Finance Organization (HFO) is preparing a large-scale sale of a portfolio of non-performing loans worth approximately 135 million euros. This decision was discussed as part of the review of the 2026 budget by the Parliamentary Finance Committee and reflects a strategy to reduce the share of non-performing loans.
HFO General Director Christoforos Kaplanis clarified that the previous budget had already included the sale of a portfolio worth 57 million euros. Of this amount, about 52 million euros were loans secured by real estate valued above 250 thousand euros, while around 5 million euros related to properties that are no longer considered primary residences.
This year, the scale is increasing: of the planned 135 million euros, about 50 million euros are linked to properties priced above 250 thousand euros, and 85 million euros are loans overdue for more than eight years. These are extremely problematic assets, as such a delay means 96 unpaid monthly installments.
Timeline and sale procedure
The sales process will be carried out in stages and will take a significant amount of time. After the budget is approved, a tender announcement is expected—tentatively in April or May. This will be followed by the selection of investors and a comprehensive due diligence process on the portfolio, which usually takes about a year.
The full completion of the procedure is projected either by the end of 2027 or at the beginning of 2028. Such a long timeframe is explained by the need for thorough risk assessment and legal verification of assets before the final transaction.
Reduction of non-performing loans
In recent years, HFO has managed to significantly improve its financial position. While previously the volume of non-performing loans consistently remained at around 270 million euros annually, by February it had decreased to 254 million euros. The actual figure is about 230 million euros if loans undergoing restructuring are excluded.
Government borrower support programs played a significant role in this, including the “Ikia” and “Rent instead of payment” schemes. These measures helped reduce the debt burden on households and at the same time lowered risks for the financial system.
Additionally, over the past 26 months, 486 solutions were found for problematic loans totaling about 50 million euros. This is twice as much as in previous years. Overall, taking into account all managed portfolios, 1,557 cases totaling 85.5 million euros have been processed.
Technological upgrade and new services
The organization is actively modernizing its infrastructure. A project is already underway to transition to its own technological systems, independent of KEDIPES. The first phase of the upgrade is 43% complete and is expected to be fully implemented by mid-year. In the future, HFO plans to introduce full online banking, as well as expand customer services, including bank cards and ATMs. This will improve service convenience and strengthen its competitive position in the market.
Against the backdrop of rising interest rates in Europe, HFO continues to offer mortgage loans at 3.25%. This is one of the most attractive levels on the market, especially considering that the organization uses a single interest rate and annual capitalization, unlike commercial banks with more complex rate structures.
It is important to note that in 2025–2026 the Cyprus real estate market remains resilient despite inflationary pressure and high borrowing costs in the eurozone. Demand for housing remains stable, especially in the mid- and high-end segments, making such portfolios attractive to investors.
As a result, the sale of non-performing assets worth 135 million euros could become an important step not only for improving HFO’s balance sheet but also for further stabilizing the country’s entire financial system.