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Scheme to protect primary residences falls flat

A government-backed scheme designed to protect primary residences has fallen flat, MPs heard on Monday.

The scheme, rolled out in the summer of 2016, provides for subsidising mortgage payments for people who have been affected by unemployment or a drop in income. It was to be implemented by the Cyprus Land Development Corporation (Koag).

The scheme concerns housing loans, for which the primary (permanent) residence has been put up as collateral with a lender operating under licence from the Central Bank of Cyprus.

It covers residences of a market value of €250,000 or less (plus VAT), and the outstanding loan amount cannot exceed €300,000.

Beneficiaries may have up to 60 per cent of their monthly mortgage instalment subsidised for up to three consecutive years; the subsidy covers both payments on the interest and the principal.

There is a cap of €10,000 per year, per debtor.

But in parliament, Koag chairman Andreas Frangos said only a couple of applications have been submitted to date, and even these were deemed to be ineligible.

A precondition for eligibility is that applicants must have exhausted the debt restructuring procedures under the Central Bank’s Directive on Arrears Management of 2015, as well as the mediation procedures under the financial ombudsman. Finally, applicants must have beforehand taken recourse with an insolvency practitioner, who will give the green light for a person to be eligible to apply for the Koag scheme.

However, the very few applications submitted cannot proceed because the financial ombudsman is not proceeding with the appointment of mediators, MPs were told.

Akel MP Aristos Damianou criticised the government for bringing a scheme that turned out to be ineffectual.

“It is yet another pledge with no practical benefit to all these people who are struggling,” he said.

When the scheme was first envisaged, officials estimated it would benefit some 200 households.

 

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