Cyprus Land Development Corporation (KOAG) has raised more than €20 million by selling additional building density to developers. The funds will be used to construct 250 residential units, which will either be sold at reduced prices or offered for rent at affordable rates.
Apartments intended for sale will be priced at around €1,650 per 1 m2. This means that an 80 m2 apartment will cost approximately €132,000. By comparison, similar housing in some areas of Cyprus already costs more than €180,000, although the final price varies significantly depending on the city and location.
The funds were raised under the government’s affordable housing scheme. It allows developers to increase the permitted building density of their projects. In return, companies are normally required to allocate part of the properties they build to the affordable housing programme. However, some developers have chosen to make a financial contribution in exchange for the additional density. As a result, they can sell all their apartments at market prices without transferring part of the properties to KOAG.
Project Details
Under the current scheme, 147 apartments are expected to be created and sold at a price of €1,650 per 1 m2. This is particularly important amid the continuing rise in property prices in Cyprus, which is most noticeable in major cities and the most sought-after areas. At the same time, KOAG is developing the affordable rental segment. Rental rates are planned to be set approximately 30% below the average market rent in the respective area. The calculations will be based on valuations by the Cyprus Land Department.
Particular attention is being paid to Limassol, where rental costs are significantly higher than in most other cities on the island. KOAG is considering increasing the discount for its properties to 40%. A final decision will be made at a later stage. The organisation is also considering allocating a larger share of new properties specifically to affordable rental housing. The reason is that some families cannot afford to purchase property even at below-market prices.
KOAG Is Already Building 245 Residential Units
KOAG is currently constructing 245 residential units. Another 100 properties are planned for affordable rental housing. In addition, the organisation intends to utilise 135 plots of land. KOAG has explored various ways to reduce construction costs. In particular, it considered purchasing unfinished residential and tourism projects held by banks and asset management companies. However, the idea was abandoned: some properties had building permits that had expired long ago, while the technical condition of the buildings and their compliance with modern seismic requirements raised concerns.
In some cases, the buildings would have had to be completely demolished and rebuilt. As a result, KOAG concluded that constructing new projects would be more economically viable.
The organisation has already acquired several plots of land from property management companies at relatively favourable prices. In particular, sites in Strovolos are planned to be used for the construction of affordable rental housing. The possibility of building high-quality prefabricated homes was also considered but ultimately rejected. This approach would have allowed permits to be obtained approximately six months faster, but it did not result in significant construction cost savings.
Government Aims to Build 10,000 New Homes
KOAG is gradually becoming one of the key instruments of Cyprus’ housing policy. The government is using both state programmes and incentives for private developers to increase housing supply. Cyprus Interior Minister Constantinos Ioannou told MPs that the existing measures could lead to the construction of around 10,000 new residential units. Under one of the programmes, permitted building density can be increased by up to 45%. So far, 47 applications have been submitted, covering the construction of more than 2,500 residential units, including around 400 affordable apartments. Developers who do not wish to allocate part of their properties to the affordable housing programme have the option of providing financial compensation instead. Initially, such contributions amounted to around €17 million, but the total has now exceeded €20 million.
Further potential is being created by the accelerated approval procedure for construction projects. Projects for approximately 930 apartment buildings and around 3,000 private houses have already been approved. Even assuming an average of 10 apartments per apartment building, this could result in around 9,300 new apartments. Together with private houses, the potential supply exceeds 12,000 new residential units.
For the Cyprus real estate market, this means a significant increase in supply over the coming years. However, the key question is how many of these properties will actually be affordable for middle-income families. KOAG’s immediate task is to increase the amount of housing that can be purchased or rented at prices below rapidly rising market rates, particularly in cities where property costs are highest.