Developers take cars as down payment for homes

The program was elaborated by the Government in order to unlock the residential market and targets people who have never owned a home. The state guarantees mortgages worth up to €60,000, and banks provide better interest rates. With the €1 billion allocated for such guarantees, some 16,000-20,000 apartments can be purchased.

Of the 7,000 houses and apartments exhibited at the fair, some 80 percent were below the €60,000 threshold. In order to attract buyers, developers drafted original offers, such as loans based on ID only, second-hand cars as down payment or tailor-made homes to fit the client's budget. However, some of these offers are not compatible with the "First Home" project Salaj Rezidential company, developer of the Poiana Florilor villa in southeastern Bucharest, allows clients to give their cars or another apartment as down payment.

"We already signed three pre-contracts in which the car was given as down payment. We have a Series 3 BMW, estimated at €10,000, and other cars worth €10,000-30,000," the project owner Teodor Mihailescu, said. So far, the company has 400 potential clients, of which 50 are decided to buy a villa soon. The complex will include up to 100 units.

The Hope City project comes up with an even striking offer: loan based on the ID only. "We are not interested in where the money come from. If clients fail to pay the installment for three months, the developer takes the house back, plus a penalization amounting to 20 percent of the house's value," the company's Sales Representative, Denisa Barbulescu, said. Buyers must pay 5 percent (at least €2,400) of the apartment value. The remainder is paid in equal installments to the developer and not to a bank, with a fixed interest rate of 3.8 percent, for 30 years. The pre-contract is signed at a public notary's office.

The price of a studio apartment in Hope City is €46,200, while bedroom apartment cost €73,800. Prices for two-bedroom apartments amount to €99,000. Impact Developer&Contractor, one of the first companies to come up with alternative payment solutions, launched a new offer, allowing clients to resize the apartment based on their budgets. The lowest price for such an apartment is €57,221, parking spot and value added tax (VAT) included.

During the first two days of the fair, developers signed 110 pre-contracts and organizers were expecting to double this figure by last night. "Most people are interested in studio apartments and one-bedroom apartments that can be purchased through the «First Home» program," the Managing Partner of Project Events the fair's organizer, Sorin Sararu, said.

According to data released by the National Union of Public Notaries (UNNPR), the number of land and house transactions dropped some 35.7 percent in the first five months of 2009, compared to January-May 2008, to 134,000 deals. UNNPR representatives were estimating a 30-50 percent plunge in residential deals by the end of the year. The "First Home" project is expected to help the real estate market rebound, but developers are not very optimistic, given that both new and old apartments can be purchased through the program.

Business Standard