In Cyprus, preparations are underway to adopt important legislative changes that will directly affect the real estate and mortgage lending market. In the near future, deputies plan to vote on a package of reforms aimed at protecting borrowers, especially those at risk of losing their only home.
It is expected that the discussion will reach a plenary session of Parliament as early as the beginning of April after detailed consideration in the parliamentary finance committee of Cyprus. The new rules are intended to create a more balanced system between banks and citizens amid the economic challenges of recent years.
How the rules for property repossession will change
The upcoming changes are aimed at eliminating gaps in existing debt recovery laws. The focus is on protecting not only borrowers but also guarantors, who often find themselves in difficult financial situations.
It is planned to introduce a mechanism under which guarantors will not be liable for amounts exceeding the original loan size if the property has already been sold at auction. This will reduce the financial burden on families and limit risks associated with debt.
In addition, banks and investment funds will not be able to immediately demand payments from guarantors if the borrower is disputing the debt amount in court. In such cases, creditors will be required to wait for a court decision.
Borrowers will receive more rights in court
The reform also provides expanding opportunities to protect borrowers’ rights through the courts. People will be able to seek suspension of the property repossession procedure if there are grounds to believe the debt is overstated or the contract terms are unfair. This is an important step, as previously many borrowers faced fast recovery procedures without sufficient time for legal defense.
Possible debt write-offs and interest limits
As part of the discussion, more serious measures are also being considered. The authorities plan to introduce rules under which the remaining debt may be written off if the proceeds from the sale of the property are insufficient to cover it in full.
Limits on interest accrual are also being discussed. In particular, there is a proposal to prohibit banks from increasing debt beyond twice the original loan amount. This is intended to prevent situations where debt becomes unmanageable.
What will change for the real estate market
Additionally, bankruptcy procedures and rules for conducting property auctions will be revised. In particular, maintaining a minimum sale price at 50% of market value even several months after the first auction is being discussed.
At the same time, the government proposes introducing debt restructuring mechanisms directly during the property repossession process. It is also planned to strengthen the role of the Cyprus financial ombudsman, whose decisions may become binding for disputes up to 20 thousand euros.
When the decision will be made and what it means
The final vote is expected in April, and its results will have a significant impact on the Cyprus real estate market. The new rules may change the balance between the interests of banks and borrowers, as well as affect the investment climate.
Experts note that the reform can make the market more stable and transparent. At the same time, some proposals are causing legal disputes, especially regarding the suspension of recoveries and the powers of the ombudsman. In any case, Cyprus is moving toward creating a more modern and socially oriented model of debt and real estate regulation, which will be an important step for the country’s entire economy.