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Developers say building package will create ghettos

Property developers say that the Cyprus government’s new package to boost the construction sector by building 500 additional low cost properties will create ghettos.

CYPRUS property developers say that the state’s new stimulus package to boost the construction sector by building 500 additional low cost properties in Cyprus will force many young couples and low-income families into ‘government housing’ that will end up as ghettos.

The Developer’s Association also said the stimulus also violated competition laws, giving the government a virtual monopoly on housing.

The €300 million package includes €200 million in housing loans, to be funnelled through the Cyprus Land Development Corporation (CLDC), which was set up 30 years ago as part of the state’s social policy to help low-income families acquire their own homes.

Developers say boosting the CLDC would essentially limit people’s choice and force them to opt for properties that come through the state rather than the private sector.

The way the measure was announced favours developers who, based on bad calculations, built low-quality houses and buildings in areas that are not appropriate for private housing, and are selling them cheaply to avoid losses,” said Lakis Tofarides, President of the Developers Association.

Some of these developers have already sent their offers to the Corporation to get rid of properties which they cannot sell,” he added.

Tofarides also claimed the programme would essentially force young couples and low-income families to become concentrated in undervalued areas, creating ghettos.

The Corporation already determined the price at which it will buy, which is between €1,400 and €1,600 per square metre. That alone indicates that the properties the CLDC will buy are of bad quality, cheap materials and without the essential infrastructure such as central heating and so on. It is not possible to find at this time properties including the land at such prices,” he said.

The Developers Association also claim that the measure violated the principle of equal treatment and the laws on Competition and Public Support. The Association said that legal measures will be taken if necessary.

The state however claims that the developers misunderstood the provisions in the package, which in fact does not limit consumer choice.

I think they have not studied the government’s decision in depth. There is no restriction and applicants can buy flats or houses either from private developers or from the CLDC’s list of properties. There is no specific criterion and each applicant is free to buy the property of their liking,” said Finance Minister Charilaos Stavrakis.

Meanwhile, AKEL expressed its opposition to the belief that an uncontrolled free market was the solution. “We never trusted the pure -as some may called it- market to solve society’s problems and we don’t trust it now,” said Andros Kyprianou, AKEL general-secretary.

Opposition DISY agreed that the provision of housing loans with positive terms was a good development that could be ruined by procedural requirements. “It is not necessary to go through procedures by which the CLDC must buy from the private sector so that the applicant can get a loan from the Housing Funding Organisation,” said Averoff Neophytou, DISY vice-president.

Copyright © Cyprus Mail 2009

Editors comments

According to the Cyprus Statistical Service, construction costs in 2007 were €803/m2 in 2007 for houses €726/m2 for apartments. (These figures exclude the cost of land). Even when taking the additional cost of land into the equation, it must be possible to build and sell good quality properties for €1,400/m2 and €1,600/m2 and still make a good profit?

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