(Adds BuySell reaction in 14th and 18th paragraphs)
By Stelios Orphanides
The commercialisation of Cyprus’s passport, made possible by special government schemes addressing wealthy buyers, prompted BuySell Real Estate, the Paphos-based real estate agency, to launch a new product which provides most of the required funds.
The BuySell product, informally dubbed “EU citizenship for €800k” and advertised on various English-language media websites, offers property buyers lacking the entire amount of the €2m required for the investment, financing from an unspecified Hong Kong-based bank, the real estate company said in its ad.
“Cyprus law allows you to get Cyprus (European) citizenship by investing two million euros (€2,000,000) in property,” BuySell said. “The Cyprus immigration law does not allow financing your property purchase by a Cypriot bank. If you apply for Cyprus citizenship, all funds should come from abroad”.
“Now, with €800,000 only, you can get a Cyprus (European) passport for you and your family 3 months from today,” the BuySell ad said, adding that it “signed a special agreement with our associate bank in Hong Kong to finance up to 60 per cent of your Cyprus citizenship investment. We can arrange a loan for you regardless of your current citizenship”.
The citizenship scheme, as well as the permanent residency scheme, were put in place by the government in response to the 2013 banking and property bust in order to help reduce the huge amount of non-performing loans and support prices of Cypriot property, which serves as collateral in the banks’ balance sheets. The ministry of interior said earlier this month that the two schemes have generated a benefit for the economy worth €3.6bn.
A few months ago, the government lowered the minimum investment requirement from €2.5m to €2m by ditching an obligation for an investor to donate €500,000 to government-run projects.
The BuySell scheme provides for the acquisition of two properties worth €800,000 and €1.2m respectively, according to the ad. The customer has to pay with own funds for the acquisition of the first property while the bank will provide a €1.2m loan for the purchase of the second property which the investor has to retain for three years before selling it in order to repay the loan.
The BuySell scheme, which is limited to 50 customers and includes an obligation of the Hong Kong lender to buy back the property at the same price, has already drawn fire from various economists on social media on Sunday.
In response to the criticism, minister of the Interior Socratis Hasicos said that the citizenship and permanent-residency schemes “have helped” and are still helping the Cypriot economy. “Let’s protect them,” he commented on Twitter.
“This is not sustainable development, my minister,” economist Sofronis Clerides who teaches at the University of Cyprus responded, also on Twitter. “We are creating new bubbles”.
Economist Alexander Apostolides, who teaches at the Nicosia-based European Univesity of Cyprus, raised in a Twitter comment also the issue whether the BuySell programme is in line with official procedures, and criticised the way the scheme is advertised.
Apostolides’s comments prompted Natasa Pilidou, director general of the government-sponsored Cyprus Investment Promotion Agency (CIPA) to respond saying “I agree”.
CIPA, she said, has communicated repeatedly with the company “without any result” and added that the agency has contacted the Finance Ministry which is in charge of the evaluation of related applications. “Various measures are being considered to address the issue on a wider basis,” she commented on her Twitter account.
BuySell denied that it was recipient of complaints from CIPA.
In response to the criticism on how the Cypriot citizenship scheme is advertised, she tweeted that “other kind of action is required, maybe an information seminar on proposed ways of promotion”.
Political analyst Christophoros Christophorou said in an interview that Cyprus’s citizen schemes may anger other European Union member states, as they undermine their policies. He also argued that Cyprus’s practice, also applied by other EU member states, raises an issue of discrimination and could be likely considered a violation of human rights.
“There are immigrants living and working in Cyprus for several years and they have less rights than various ‘moneybags’ and what Cyprus’s European and international obligations provide”, he said.
Philippos Nikiforou, director and founder of BuySell said on Monday that his company’s campaign is not an action against the spirit of the government’s scheme. “All money comes from abroad, all €2m” which remain in Cyprus for three years, he said in telephone interview. “The state is benefiting from the payment of all taxes, the investment remains in Cyprus”.
Nikiforou, who declined to reveal the name of the financial institution facilitating the scheme, said that the properties which investors can acquire for €1.2m are specific, limited and pre-evaluated at a significantly higher value by the bank and therefore customers are in no risk of losing money in case of a further price slump three years after they sell their property. “The bank finances specific projects,” he said adding that at the time of the obligatory buyback “the government will receive additional tax transfer fees; the benefit for the government is double”.
According to Central Bank of Cyprus data, home prices dropped almost one third since the beginning of the crisis eight years ago are recently showing tentative signs of stabilisation.