Cyprus Government Presents A New Support Scheme for Problem Loans

Правительство Кипра представило новую схему господдержки проблемных заёмщиков
24 March 2021 Liza Medvetskaya

Several thousand borrowers, whose home is at highest risk to be sold, will have another chance to save their property.

The Cyprus government intends to launch a new program of state support for vulnerable households with red loans.

The new social measure will be aimed at preventing unrest during the coronavirus pandemic, as well as the eviction of families from their own homes.

According to the idea, the property of unreliable borrowers will be bought by the Bad Bank with a discount of 50% to 60% . The Bad Bank is now under the leadership of the Cyprus Property Management Company (KEDIPES).

The beneficiaries of the plan will be individuals with overdue loans who want to save their first residential or commercial property, the market value of which does not exceed EUR 350 thousand. At the same time, borrowers will be able to take advantage of the new scheme, regardless of whether they previously participated in other government support schemes or not.

Правительство Кипра представило новую схему господдержки проблемных заёмщиков

KEDIPES will buy problem property and sign a lease agreement with their owners.

The annual rent is expected to be between 2% and 3% of the market value of the property. The rent will be regularly adjusted according to certain conditions. At the same time, the annual rent for borrowers who belong to vulnerable groups will be paid by the state.

If the age of the property owners as of December 31, 2021 is over 65 years old, they will be able to permanently reside in their house, but will have to pay rent. The project participants will have the opportunity to buy the property within five years at the cost of its acquisition by KEDIPES minus the rent paid.

First degree relative of kinship (children, father and mother) will have the right to buy the property on the same terms as the owner.

After the five-year period, KEDIPES will be able to sell the property, and the owner will receive the first right to purchase the property.

Thus, borrowers will have the opportunity to rent their former property with the option of further purchase.

According to preliminary data, the project will cover a portfolio of red loans worth between EUR 2.5 and 3 billion, of which approximately EUR 1.5 billion will fall on KEDIPES clients.

As you may know, after the transformation of KEDIPES into a “Bad Bank”, the Ministry of Finance is promoting a new plan for vulnerable families, which has nothing to do with Estia-2. In fact, it will be a kind of leasing, in which borrowers will be able to buy out their property within 5 years. As KEDIPES develops, the new company will purchase a portfolio of loans related to basic residential and commercial housing.

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