Nama will oversee the new Home Building Finance Ireland (HBFI) agency, which will lend to private developers who may have been denied loans from the banks.
Announcing the agency, Finance Minister Paschal Donohoe insisted developers availing of the market-rate loans would have the same obligations as applied in commercial deals.
“The role of this new organisation will be to provide credit to developers who have a business case that is credible for numbers of homes in excess of 10,” said Mr Donohoe. “This credit will be made available at the prevailing market rate and, as such, the risk will be managed such as a normal bank engaged in a commercial contract with anybody looking to borrow money from them.”
The agency was announced in the budget and is to help tackle the housing crisis, the Government says, as developers are still being denied loans from main street banks. The expertise of Nama and its staff will be used for the new agency.
Housing Minister Eoghan Murphy said the money would be targetted at existing sites where there was already planning permission, for projects involving a minimum 10 units.
Subject to legislation passing the Dáil, it is expected the HBFI will be set up with a view to begin lending by the second half of this year.
Asked about how easy it would be for developers to access the fund, Mr Donohoe said he would not “hand over money to anybody”.
He warned developers who access the fund that if the new homes were not affordable, there would be repercussions.
“If they [the homes] are not at the right price, there will be consequences for them [the developers],” said Mr Donohoe.
The agency and its targets will be reviewed after two years, it was added, and it would be assessed as to whether its work needs to be reduced or not.
However, the loans will not be lower than existing bank rates as, otherwise, the measure could result in claims of state aid being used for projects.
Mr Donohoe denied that the taxpayer was being “used” to offer cheaper loans to developers. He insisted Nama would have to ensure each project made commercial sense. Furthermore, the collateral and guarantees that developers promised would be every bit as significant as if it was a normal commercial loan, the minister added.
Mr Murphy said: “This is an important initiative with the potential to provide the necessary financial support, in particular for small and medium-sized developers and builders to maximise the capacity in the building sector to deliver new homes, especially in our urban areas where the demand and affordability challenges are greatest.”