15.03.2021
There are a number of factors that make the current time suitable for establishing real estate investment funds in Cyprus.
Our opinion is based on the following:
- Real estate prices have reached the minimum level for good properties, and no major changes are expected in the near future;
- Financiers offer to buy real estate through alternative exchange transactions or auctions at affordable prices. At the same time, the price is negotiated;
- The offer of various types of properties meets the demand and you can find enough options in all areas of Cyprus;
- There is a long-term financing option;
- Interest on deposits is reduced;
- An analysis of recent events and forecasts gives an understanding that real estate prices are rising (at least for some properties);
Already existing concerns about the soundness of European banks are growing.
Considering that financing in the real estate market in Cyprus is currently limited, is it worth paying attention to the issue of creating investment funds in the field of real estate?
The most profitable areas for investment in real estate in Cyprus:
- Objects located in the seaside areas of the Famagusta region, such as Ayia Napa, Paralimni, Sotira and Derynia;
- Buildings for long-term (at least 4-6 years) leasing to reputable tenants, the yield of which is 4%;
- Used residential apartments in selected areas of cities that are in need of repair or modernization, with a good chance of resale. Avoid apartment buildings whose original purpose was to obtain citizenship by investment.When creating these funds, one could rely on the initial participation of a financier who would act as the main shareholder and could leave in 2-4 years.
Since the management will be concentrated in the hands of the financier, other shareholders are likely to feel more secure than when the funds are in the hands of individuals or companies. The more attractive the fund is to the market, the higher the demand for it will be.
If financiers or majority shareholders guarantee a certain annual return for the first two or three years, then such investments will become even more attractive. This will help provide shareholders with an initial return, and with it the expected capital growth and, as a result, the expected profit.
Financiers could create many such funds with different levels of equity investment. Larger funds could divert funds to more expensive investments. Such as hotels, golf courses, student residences, villas, etc.
This state of affairs can attract large investors from abroad.
The idea needs careful consideration, but we believe it is worth exploring, especially for financiers and investors with a large amount of funds.
As far as alternative investment funds are concerned, investments in agricultural funds should not be completely discounted. The problem with this fund lies in the small plots of agricultural land.
If financiers come together, exchange ideas and decide how to promote these farmlands in one area, then large holdings can be created.Investments in agriculture will require a special study of soil suitability and product quality. To this end, the Ministry of Agriculture could help with expertise, and various subsidies and insurance are an added plus.
