A new State lender for small and medium sized builders and developers has opened for business today.
Home Building Finance Ireland has an initial €750m to fund the delivery of up to 7,500 new homes over the next five years.
As well as the €750m available from the Ireland Strategic Investment Fund (ISIF), HBFI also has the ability to raise further funds on the market if needed.
HBFI stressed that it is not a developer or a builder but is a funder and enabler of new homes and it will be audited by the Comptroller & Auditor General.
It said its lending will be on commercial market terms.
The interest rates it will charge will reflect the market, the credit risk of each particular project, the quality of collateral, the creditworthiness of the borrower and their track record in the delivery of residential development projects.
The term of its loans will be up to five years, with loans of up to €35m available for any single development.
The development the loan is being used for must have a minimum size of ten units and the sites to be developed must have planning permission or have lodged a planning application.
Minister for Finance and Public Expenditure & Reform Paschal Donohoe said that HBFI is a smart, efficient and targeted measure that is just one aspect of the multi-faceted approach the Government is taking to resolve the housing crisis.
"It will facilitate the construction of up to 7,500 new homes throughout the country by optimising the use of resources already available within the State and with minimum risk to the taxpayer," the Minister said.
Eoghan Murphy, the Minister for Housing, Planning and Local Government, said that while there are no easy solutions to the housing crisis, the creation of HBFI will have a real and tangible impact in addressing one of the underlying problems in the market today.
"It will build on the progress already made in boosting supply. It is a very significant step and restores another once broken part of our housing sector in a sustainable way," the Minister added.
The Institute of Professional Auctioneers and Valuers welcomed the news.
But Chief Executive Pat Davitt warned the terms and administration involved must not be overly burdensome.
"It’s imperative that HBFI would be in a position to offer loans with interest rates under 5pc if it is to succeed in bringing SME builders of badly needed residential homes back into the market," he said.
"If it does it will mark an innovative and workable intervention that will bring back this type of builder who was the mainstay of Irish residential home building market in the past but who has been squeezed out by unviable interest rates from the pillar banks."
"If the terms are unrealistic and don’t take cognisance of market conditions for SME builders then the loan scheme will be superfluous and only benefit those who don’t actually need it, who would already be in a position to acquire funding from existing sources."