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Behaviour that led to scrapping citizenship programme ‘catastrophic’ for economy

By Andrew Rosenbaum and George Psyllides

The chamber of commerce and industry (Keve) said Tuesday the behaviour exhibited by certain individuals was catastrophic for the economy after the government scrapped its citizenship by investment scheme, which has generated around €8bn in recent years.

In a written statement, Keve said the unforgivable and unprofessional behaviour exhibited by certain people has tarnished Cyprus, and called on the authorities to investigate the matter thoroughly and bring those responsible before justice.

Keve, however, expressed concern over the “correct and justified,” under the circumstances, decision to scrap the programme.

“Keve thinks there will be negative effects on the entire economy, especially the sectors dealing with foreign investment.”

The effects will mostly be felt in the real estate sector, the loan repayment ability of businesses, employment and entrepreneurship, the organisation said.

Keve urged the government to draft a new, more credible scheme and voiced readiness to come up with proposals.

The citizenship by investment programme was scrapped in its current form as of November 1. The decision followed a report by Al Jazeera alleging collusion by Cyprus politicians in making use of the scheme.

Large developers echoed the appeal, adding that people who break the law must be brought before justice.

The association of large developments said it was worried over the risk of losing foreign investment, something that will have catastrophic consequences for the country’s economy.

Foreign investment contributed a lot to the economy and cannot be undermined by state officials and professionals, the association said.

“Members of the association of large developments have invested millions of euros in their sector and cannot tolerate more undermining.”

High-value residential property transactions have seen remarkable rates of increase since 2013, according to the KPMG Cyprus Real Estate Market Report. They increased 18 per cent in 2019; about 56 per cent of the sites are in Limassol.

“Sales of this kind of urban luxury property are liable to be hit hardest if the scheme is cancelled,” warned Michael Cosmas, of Michael Cosmas Architecture in Engomi, Nicosia. The challenge is that mainstream buyers in Cyprus simply won’t be able to afford them, and demand from foreign clients may drop off.

“High-end housing for retirement, around a golf course, for example, may still attract ultra high net worth buyers. But the luxury seaside towers may struggle,” he added.

“This scheme has played a significant role in the recovery of the Cypriot property market since 2013, breathing new life into the construction industry, and by default into the country’s economy,” commented Kritonas Onisforou, head of real estate at the Cyprus platform of BidX1, a global property sales site. “However, the recent revelations are alarming – it’s absolutely necessary that these are tackled by government,” he noted.

He added that 30 per cent of the potential buyers for Cyprus property come from outside the EU.

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