Bankers have responded to government demands for their involvement in managing the crisis in the property and housing sector. Photo: Guy Wolff/Maison Moderne

Bankers have responded to government demands for their involvement in managing the crisis in the property and housing sector. Photo: Guy Wolff/Maison Moderne

In response to the crisis in the property and construction sector, Spuerkeess, Banque Internationale à Luxembourg, Banque Raiffeisen and SNCI are creating a temporary structure that will be able to purchase unsold homes from developers.

Spuerkeess, Banque Internationale à Luxembourg (Bil), Banque Raiffeisen--three of the major high street banks in Luxembourg with the state as a shareholder--and Société Nationale de Crédit et d’Investissement (SNCI) have joined forces to create a special purpose vehicle (SPV) in the form of a limited company, whose mission is to “facilitate relations between property developers and banks in order to facilitate housing construction.” The founders’ aim is to bring between 800 and 1,300 homes onto the market. To achieve this, the founders have endowed the structure with capital of €250m.

Another building block in housing policy

This initiative follows on from those launched by the government and known as the “housing package.” The roundtable on property organised by the government following this package--a --had mentioned possible support from the banking sector. Mention was made of relaxing the rule that a project could only be financed if 80% of the property was pre-sold--“a threshold that is no longer reached today,” noted finance minister  (CSV)--co-financing or “support from the banking sector for players who might find themselves in difficulty.” All in consultation with the CSSF, Luxembourg’s financial sector supervisory commission. In short, this is the last avenue that has been explored with the creation of the SPV.

A safety net for promoters

In practice, the SPV undertakes to buy flats intended for the residential market on the twofold condition that the project presented is viable and meets the needs of the population and that a certain rate of pre-sales is achieved. During the construction phase, the developer will be able to sell flats. And at the end of the construction phase, unsold properties will be bought back by the SPV at a pre-determined price. With a discount of up to 20% of the sale price. It’s a lesser evil for developers who are cutting their margins to the point of offering properties at cost price so as not to tie up their capital.

These properties will then be resold to third parties, private or public, “at the right price.” In terms of governance, the SPV’s board of directors will be made up of one representative per founding shareholder. An investment committee, as a sub-committee of the board, will select eligible projects.

Shared responsibilities

For the project’s promoters, led by the minister of finance, the benefits are numerous and “will help to revitalise the housing market.” The SPV will allow developers to launch projects without reaching the required level of pre-sales and will provide visibility for purchasers. The mechanism will enable risk management to be shared between the banking sector and developers.

“The revival of the construction sector and the creation of housing have been priorities for the government since it took office,” insisted Roth. “Alongside the measures that have been taken, I have always said that all the parties involved must shoulder their responsibilities. That is why I am delighted that the banks are prepared to get more involved and come up with innovative solutions. I am confident that our joint efforts will be effective.”

, CEO of Spuerkeess, hopes that the SPV will have “an accelerating effect on a return to normality in the real estate sector.” ABBL CEO welcomed an initiative of “unprecedented financial scale, an initiative that confirms the key role played by banks as responsible players.”

The SPV is designed as a temporary solution. It will be active until the end of 2024 and “depending on needs and success” for the year 2025. The SPV is also intended to be open to other banks active in the residential property market. Like BGL, which is not participating in this initiative for the time being, despite the presence of the state in its shareholding. “BGL has confirmed to me that it will contribute to the efforts of bankers to resolve the housing crisis, but by other means,” added Roth.

This article was first published in French on . It has been translated and edited for Delano.