First Home project could boost real estate sectorPublish date: 22-05-2009
The "First Home" project, which guarantees 80 percent of the value of mortgages taken out by individuals who are acquiring their first home, could have a significant positive impact on the real estate industry only if it exclusively targets the new unit market segment and provided that participating in the program is not excessively bureaucratized, said real estate players.
"If the project includes old homes also, the money will go to individuals, and will not stimulate the building industry. Another issue is related to the financing cost, because the market is blocked due to the cost and not the value of the loan. On a €60,000 loan, we actually face two enemies, fees and interest, which can increase the value of the loan three to four times," according to Dan Ioan Popp, Chairman of Impact, a company with one of the largest new home portfolios on the market. Popp added that the government's measure is intended mainly to calm lenders rather than to boost the construction sector. The total financing for this program amounts to €1 billion and the state will offer guarantees only for loans with a maximum value of €60,000.
Ministry of Finance Gheorghe Pogea announced that the National Fund for Guaranteeing Loans for Small and Medium-Sized Enterprises (SME) will contract a loan worth €100 million, with the state guaranteeing 80 percent of this amount, and the Fund's activity will be expanded to include bank mortgages.
"The only problem that could arise is the bureaucratization of the procedure one must apply to obtain this guarantee. If you have to submit all kinds of documents and go to different institutions, this will be difficult. The amount of €60,000 covers most of the residential market and includes exactly the population segment that needs homes," said Shimon Galon, CEO of the Globe Trade Centre (GTC) Romania real estate developer. According to Galon, the program is intended to help individuals who have already made a down payment to acquire a new home and who are now unable to access mortgages. A large portion of GTC's clients are in this situation.
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