12 government measures for the “restart” of the Greek Real Estate and constructions
12 government measures for the “restart” of the Greek Real Estate and constructions
By Alexandros Mavvidis*
According to experts, we are currently at the peak of the pandemic, and, while we look forward to the gradual lifting of the restrictive measures, it is necessary to take immediate measures to restart the property and the construction industry, in order to prevent – as much as possible – the consequences of coronavirus on Greek real estate.
Real estate is an important pillar for the development of the Greek economy. Consequently, in the following months the government policy will include, not only the intense effort to limit the negative consequences of the coronavirus, but also the practical support of this unit, in order to achieve its dynamic development in the near future. Investment in construction will obviously support the recovery of the economy. As people say, kill two birds with one stone!
Therefore, the following twelve measures are proposed, in addition to the existing ones, which will have a positive effect on the real estate market and the construction industry. The measures will be of limited duration in order to activate the investors in immediate actions, overcoming their fears and the current negative psychology. The measures can be implemented gradually. However, only the overall impact of the package will lead to a real “positive shot”. The financial benefits are offered with specific commitments, and in case they are not observed, the benefits are abolished retroactively and returned – with interest – to the state. At the same time, investments are also made by the state.
The measures will enter into force in the years 2020 and 2021. It is obvious that the costs of the measures, the benefits for the economy, as well as the possible negative consequences (profit and loss) will be analyzed. In addition, the implementation of the measures will be monitored and adequate resources will be secured, although recent decisions by the ECB (European Central Bank) will greatly facilitate the discovery of resources. In any case, the possible “financial bubbles” and the big distortion of the market are avoided. Therefore, once again, the precise regulation of measures is necessary. It is obvious that the beneficiary will not be able to use multiple measures at the same time.
Let’s have a look at the measures.
- Establishment of a dedicated real estate team (pandemic team correspondent)
This group will monitor, until the end of 2021, the progress of the real estate and construction sector and will propose amendments or additional government actions, where necessary. Unfortunately, in the current circumstances, action by the state is considered critical. The team will consist of limited members and only expert advisors will be part of it, with a deep understanding of the Greek real estate market and its financial aspect.
- Loans with low interest for new properties, new constructions and renovations
Banks will offer loans up to 100,000 euros for each beneficiary, with a duration of ten years and interest below 1.0%, with a state guarantee. On condition that there will be either the purchase of a building or an apartment, always as the first house, newer than five years with energy Class A, or the construction of a new building, with the same energy standards. If the investment exceeds the amount of 100,000 euros, the remaining costs are covered by the investor or with an additional bank loan.
For constructions outside urban centers, e.g. in suburbs or villages near cities, larger loans could be provided, e.g. 120,000 euros, to support the decongestion of cities.
These low-interest loans could also be offered for building renovations, only when energy upgrades are included and result in the building being promoted to at least energy Class B +. Loans for renovation will not exceed 25,000 euros, while no loans will be given for the purchase of old real estate. However, this measure will indirectly impose the purchase of old real estate, due to the fact that it will support their upgrade.
In any case, the continuation of lending in this market is considered necessary. I do not want to recall the consequences for the real estate market, ten years ago, when the banks completely stopped the real estate purchases.
- Public Works – infrastructure
The state will immediately launch a generous public investment program for the years 2020 and 2021 with 20 billion euros. Half of them are mature infrastructure projects and the other half are smaller public projects across the country. Smaller projects will be outsourced immediately and will therefore directly provide jobs in the sector and money to the real economy. However, I estimate that public spaces and streets in many cities are in urgent need of maintenance. The same goes for hospitals and public buildings. This is the perfect opportunity!
- New development law – NSRF (National Strategic Reference Framework)
A few weeks ago, a cycle of the development law ended (Law 4399/2016). Therefore, the proposals will be approved with fast procedures in order to start the work immediately. Buildings and construction projects should be prioritized. An increase in budget may be required for this program, as well as the start of a new submission cycle. Ideally, advanced payments could be provided to speed up the implementation of these projects.
In addition, a special program of around 1 billion euros will be announced, e.g. through the NSRF, which will finance smaller enterprise construction projects, e.g. up to 300,000 euros, focusing on specific sectors, such as the processing of agricultural products and industries with significant export operations, excluding tourism. Therefore, with a 50% grant rate (maximum funding: 150,000 euros) more than 6,500 projects will be funded. The corresponding files, speaking as an Engineer, can be prepared in a few weeks.
In times of uncertainty, the maintenance of operation liquidity in “reassuring” levels is crucial. At the same time, however, the growth process of each business shall not be interrupted. If we combine the possibility of deferral of the payment obligations towards the state (excluding VAT), with investment in new construction works, it will motivate the materialization of works, and more, if the work is necessary for the business development. Therefore, for each euro invested by a business in construction work up to 100,000 euros, which will be approved until the end of following September and materialized until 31.12.2021, will be able to defer equal payments, interest-free and with correspondent regulation, beyond the year 2021.
- Acceleration of licensing
Due to the pandemic, the state is currently in a state of self-defense. During the period of operation, a large number of files will be collected, which will be approved immediately in order not to stop the start of construction activity.
Especially for urban planning offices, the state will take action to prevent additional delays. The involvement of private engineers can be potentially rewarding, as is the case today with building inspectors. Engineers will be able to inspect the files and prepare inspection reports, which will be approved, only in their final stage, by the construction services of the Municipalities.
The general acceleration of licensing procedures and the reduction of bureaucracy would certainly result in attracting investment.
Let us mention the pending final approvals of large-scale projects. These projects could significantly increase activity in the construction sector.
- Tax exemptions
It is obvious that tax exemptions can always encourage investment. Consequently, the legislator, for every euro invested by a company in construction works up to 500,000 euros, from now until 31.12.2021, grants tax exemptions (excluding VAT) of 25% of the investment, which will be immediate and already valid during the year of completion of the work, while the reversal (corporate income tax minus tax exemptions) will take place up to three years after the year of commencement of work.
- VAT reduction
For the coming months and until the end of 2021, VAT will be reduced to 13% for all construction work, building materials and the services of Engineers and Consultants related to construction. This will significantly reduce construction costs and, in my opinion, will motivate investments within the aforementioned time frame. Again, this tax reduction is based on the time of implementation of the expenditure and not the time of certification. Obviously, this will balance the possibility – due to coronavirus – of reducing construction activity for the next time.
For investments in commercial real estate, which will obtain building permits from 01.05.2020 and will be completed by 31.12.2021, a faster repayment period, equal to five (5) years, is provided as an exception.
- Protection of the first residence
Due to the current extreme conditions, some homeowners may not be able to meet their loan obligations. In order to avoid significant issues at various levels of the housing market, the legislature provides for a special regulation for borrowers, adequately protecting, for at least another year, the first residence. It is obvious that strategically bad payers are excluded and insolvency is proven accordingly.
- Interest-free loans for sustainable business rents
Following the shutdown, some companies may face liquidity problems, although the state has already provided significant support measures. Therefore, for businesses that prove to be viable, the state will provide interest-free loans for six-month rent payments. During this time, the company will have the opportunity to return to “normal” conditions. The loan will be repaid in 12 interest-free installments, from 01.01.2021.
With this measure, the business will be supported, while at the same time a possible situation of vacant shops and offices that would negatively affect the real estate market will be avoided.
- Go digital – financing of digital presentation and promotion of real estate
The last few days have shown that the Internet has a growing impact on daily life after the coronavirus era. Therefore, the government will support all actions for the presentation-promotion of real estate to potential buyers, especially from abroad. Special funding from the NSRF could be provided, covering 50% of the relevant costs, with a limit of 5,000 euros for each beneficiary.
It goes without saying that some of the above measures could be considered “extreme”, given that the pandemic is ongoing and we do not yet have data on the possible consequences. However, extreme conditions such as the ones we are experiencing right now require extreme responses and need a strong “positive shock”. I consider it necessary to implement the above measures, even in a precautionary way, even in a gradual way, that is. first with small budgets, instead of waiting to see the results and then act. Careful, immediate and dynamic response to the pandemic is justified so far, as the number of deaths remains limited.
* Alexandros G. Mavidis is an Architect Engineer and General Manager of Mavvidis & Associates.