Greek banks are making a decisive entry into the local property market, adopting the Cypriot model that provides for the acquisition of valuable assets on islands or in upmarket locations, aiming at their sale or utilization.
Their immediate target is 10,000 properties that have already been selected. Banks will gain ownership of them either through forced measures or with the consent of debtors for the voluntary concession of their assets for debt settlement.
These assets are the first residential properties to be chosen from a large amount of real estate underwritten by the banks. This concerns some 500,000 homes, stores, commercial and industrial properties or even farmland equal to the number of nonperforming loans secured by properties. Lenders directly associate tackling the problem of bad loans with an effective entry into the property market, pointing to the Cypriot model.
In Cyprus, alongside the sales of loans for the improvement of banks’ portfolios, debt-for-asset swap agreements are implemented, a practice which – combined with taxation and other incentives by the government – is aimed at reducing NPLs by boosting the property market.
The same model has also been applied in Spain and Ireland, where bank portfolios and property markets also faced serious problems that were tackled via the active management of major properties or key commercial assets.
Cepal, the consortium of Alpha Bank and Lindorff (that has bought out Spain’s Aktua) that developed this model in Spain, could be the first to implement such a plan. Cepal has already begun its activity in the Greek market and is developing a cooperation plan with estate agents to sell properties on the banks’ behalf (or even the debtors’). It intends to develop a network of partners for the maintenance and renovation of those properties to sell them at the best possible rates.
Banks expect property prices to rebound and given that the 10,000 assets in question are considered prime properties, their sale or utilization is likely to give the property market a boost too.