- Cyprus Property News Magazine - http://www.news.cyprus-property-buyers.com -

Are we about to meet our NAMAsis?

Cyprus Asset Management Company
TROIKA’S draft proposals entitled “The economic adjustment program for Cyprus” contain several suggestions that will have a significant impact on the island’s property market.

One of their key proposals is the establishment of a “Cyprus Asset Management Company” (CAMC). This sounds very similar to Ireland’s “National Asset Management Agency” (NAMA), which was set up to address the serious problems that hit the country’s banking sector as the result of excessive property lending. NAMA acquired land and development and loans with a nominal value of €74 billion and is currently on-track to repay €7.5 billion of bond debt by the end of next year.

Troika proposes that CAMC will ‘buy’ non-performing and non-core assets at their real (long term) economic value and its objective will be to maximize the recovery value of those assets over the medium term.

As part of its funding strategy, CAMC will have the capacity to issue bonds that are guaranteed by the State. In exchange for the assets, the banks will receive a suitably small equity participation by CAMC, bonds issued by CAMC, cash and/or high quality securities.

Nonperforming loan recovery

The Troika also proposes that Cyprus should amend its legislation to maximize bank recovery rates for non-performing loans and that the legislative framework currently constraining the seizure and sale of loan collateral will be amended such that the property pledged as collateral can be seized and offered for sale within a maximum time-span of 18 months.

It also calls of the island’s Central Bank to immediately amend its classification of nonperforming loans to include all loans past due by more than 90 days.

Property taxation

Regarding property taxation, the Troika wants to see additional revenue of at least €20 billion. (The Interior Minister, Eleni Mavrou, has stressed that small-time property owners will not be hit by this tax rise in her recent statements to the media).

Title Deeds

The Troika suggests that Cyprus:

During its investigation, the Troika concluded that many of the problems in the island’s banking sector are home-grown and relate to over-expansion in the property market (as the case in Ireland and Spain).

A formal government response to the Troika proposals is anticipated in the coming days.

Further Reading

The Troika draft proposals “The economic adjustment program for Cyprus

Can Cyprus Benefit from the Irish Experience” by Denis O’Hare