The government greenlighted the mortgage-to-rent scheme, the latest lifeline for defaulted borrowers, following approval from the European Commission.
Government spokesperson Konstantinos Letymbiotis on Wednesday told reports the scheme will be going ahead.
It has lingered in EU hallways since the Anastasiades administration submitted it for review last summer.
The Directorate-General for Competition (GDA) of the European Commission held up the scheme as it ruled that one of the fundamental parameters violated the bloc’s legislation on state aid.
The Commission rejected an earlier request by the Republic to include non-performing loans secured by a main residence in the scheme, the market value of which would be up to €350,000.
Finally, the GDA accepted the market value to be limited to €250,000, pointing out that based on the cost of living in Cyprus, a residence worth €350,000 cannot concern vulnerable households.
Letymbiotis said the scheme would allow vulnerable households that have defaulted on their mortgage to remain in their primary residence as tenants paying rent instead of an instalment.
He said that with the new plan, vulnerable households could live in their main residence as tenants and be exempt from the mortgage.
The state will fully cover the required rent on behalf of residents, who will then have the chance to buy back the property after five years at a favourable price below the purchase level.
Recipients of welfare with non-performing loans on 31/12/2021, which remained non-performing on 31/12/2022, with a main residence at a market value of €250,000, will have the right to join the scheme.
A second category of beneficiaries on benefits deemed unviable for the state’s previous two schemes for defaulted borrowers — Estia and Oikia.
The value of their primary residence should not exceed €350,000.
The third category consists of all the Estia and Oikia schemes applicants who were originally approved for inclusion in the plans but were subsequently dropped from the scheme and deemed unviable.
“The plan is consistent with the government’s policy to reduce non-performing loans and strengthen affordable housing,” Letymbiotis said.
KEDIPES, the state-funded asset management company operating the scheme, will buy asset-backed mortgages at 65% of their values from banks.
Beneficiaries will pay rent according to the price at which KEDIPES bought the property and the agreement’s timeframe.
The mortgage-to-rent agreement entails a minimum of 14-year payment duration, while borrowers could submit a proposal to acquire the property after five years.
Beneficiaries over 65 will not be given a specific timeframe to pay off their mortgage.
