01.01.2024
Builders in Cyprus welcome Cabinet approval of a package of incentives for the construction of affordable housing, promising a dynamic development of the island’s property market, which has become a financial burden for Cypriots.
Stelios Gavriel, secretary of the Federation of Building Contractors Associations of Cyprus (OSEOK), said developers are already strategizing to use the scheme to overcome funding problems.
Last week, the Council of Ministers approved new construction incentives proposed by the Ministry of the Interior.
The goal of the incentive package is to have approximately 800 affordable housing units on the market for both purchase and rental over the next three years.
As part of a strategic initiative to stimulate the development of affordable housing, the government has introduced a new, revolutionary housing policy.
Landowners with a land plot of more than 1,000 square meters. m. and a construction ratio above 100% now have access to a favorable additional construction ratio of 45%. For plots of less than 1000 sq.m. There will be an increase in real estate construction by 25%. These incentives are specifically designed for builders, with the program aimed at promoting affordable housing through an additional construction factor.
Of this additional 45% factor, 25% is earmarked for affordable housing development and the remaining 20% is at the discretion of the developer. In the event that the constructed property remains unsold, the state-owned Cyprus Land Corporation will act as “insurance”. Homes that do not sell within two years become the responsibility of the organization that purchases them and includes them in the affordable rental program.
Available liquidity
Gavriel stressed that while new incentives for builders are attractive, stakeholders will need to attract investors with available liquidity for large projects. He explained that developers using the new program can build additional properties, of which 25% must be available at a low cost.
Those who choose to rent 25% of properties built using the Extended Construction Ratio will be given a discount of 30% on the average price of properties in the same category.
Gavriel noted that finding investors with cash and a willingness to make long-term investments is important as banks remain hesitant to lend to developers, who in turn must rely on their own funding or wealthy investors.
Gavriel expressed agreement with the government’s plans to increase the number of residential properties to reduce the cost of purchase and rental for citizens in need. He foresees increased demand for them in the coming years, especially given the popularity of Cyprus as a relocation destination for fintech and high-tech companies thanks to government incentive schemes.
