4% interest on state loans to developers

Developers will be charged as low as 4% interest on state loans to construct houses under the new Home Building Finance Ireland (HBFI) scheme.

The finer details of HBFI, announced as part of Budget 2018, will have to be hammered out and put into legislation before money can be loaned out, but it is understood that the Government is looking at offering interest rates of between 4% and 7% to builders.

It comes after Housing Minister Eoghan Murphy faced further criticism over the number of social houses that will be directly built by local authorities next year, with opposition parties claiming there has been no increase on the targets outlined by former housing minister Simon Coveney last year.

One of the main housing proposals contained in this week’s budget was the creation of HBFI which aims to provide finances to ramp up home construction to ease the housing crisis.

While some banks are only lending up to 60% of the cost of developing a housing estate or apartment block, it is understood that HBFI would provide around 80% funding or possibly more if the scheme is deemed particularly worthwhile.

HBFI will draw on the expertise of Nama which has already been working with a number of its debtors to get houses built. But it will be a separate entity to Nama.

Nama chairman Frank Daly said: “In practical terms it is making a fund of €750m available for lending to construction firms, to builders to property developers who might have sites on which they could build houses, but who have problems accessing finance.

“So it’s a substantial amount of money.”

Mr Daly said his agency has been working with Nama debtors since 2014 and so far 5,600 homes have been built through these arrangements with a further 3,000 under construction.

“So there is a model there, there is an experience there, there is a skill-set there which can easily translate to providing the same type of opportunity, the same type of lending to people who are non-Nama debtors,” he said.

Separately Mr Murphy came under pressure from Sinn Féin spokesman Eoin Ó Broin who claimed there is a “terribly low, anaemic level of social housing provision” in Budget 2018 as the targets do not go further than what had previously been outlined.

“Many of us had a real expectation after the appointment of Minister Murphy and comments that the new Taoiseach had made that they were going to go above and beyond the Simon Coveney targets announced over a year ago,” Mr Ó Broin told RTE’s News at One.

Mr Murphy said that there has already been a “significant ramping-up” of homes directly built by local authorities, with less than 500 homes constructed in 2015, around 2,000 in 2017 and approximately 3,800 next year.

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