News item | 14-02-2024 | 16:39
In many cases, stalled new construction projects can still start through an extension facility, according to research by Capital Value. Such a facility provides short-term loans that allow developers to finance the construction costs of homes that have not yet been sold. This limits delays in housing construction projects.
Expansion facility: faster pace in new construction
Changing economic conditions, with rising interest rates and higher construction costs, make it more difficult for developers to sell 70 percent of homes before the start of a new construction project. This presale percentage is very important for lenders and insurers. If these are not met, projects often cannot start.
According to the Capital Value research, an extension facility can offer a solution. This allows the government to provide a mortgage loan at market interest rates to developers who have not yet sold 70 percent of the homes. This loan starts with construction and ends with delivery of the new homes. As collateral, a right of mortgage is established on the unsold homes or apartment rights. The House of Representatives has reserved 175 million euros for this with an amendment by members Grinwis and Nijboer.
Expansion facility more effective than purchase fund
Capital Value has also investigated the effectiveness of a variant of the extension facility: a extension guarantee developed by Brink in 2020. This is a fund with which the government can buy unsold homes. According to Capital Value, a buy-back fund is no longer feasible in the current market. For example, the fund must have significant assets. In addition, the financial risks surrounding the rental and sale of the purchased homes are high and lie entirely with the government.
A more effective alternative is the extension facility. This gives substance to the Grinwis and Nijboer amendment. If lenders contribute 75% and the government 25% – the aforementioned reserved 175 million euros – the extension facility can support the construction of approximately 4,600 homes simultaneously. Because the homes serve as collateral for the financing, the risk is relatively low. Capital Value therefore expects lenders to be willing to contribute.
Further elaboration for the summer
In the near future, Minister Hugo de Jonge for Housing and Spatial Planning will further develop the extension facility. He will enter into discussions with the construction sector, construction insurers and lenders. Before the summer, the minister will inform the House of Representatives about the outcomes of these discussions.