Young Buyers to Receive Subsidies for Housing Loans

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Government promises that legislation will be in force by early summer.

Subsidies which will cover half of instalments of housing loans for young people over the period of four years, which is a move that the government announced as part of its demographic policies, are expected to be formally introduced by early summer. The law is currently in the public consultation period which will last until 12 January, and it could enter into force as early as March, reports on January 6, 2017.

The government’s Agency for Real Estate Transactions (APN) will then announce a call for banks with conditions for their participation. “I expect that by the end of June or in early July we will announce a call to interested citizens to take advantage of this measure”, said Minister of Construction and Urban Planning Lovro Kuščević. The project is intended as a measure to help young people – singles and people in marriages and civil unions younger than 45 years old, who want to buy their first property.

The measure is expected to cost the budget 35 million kuna in 2017, while the sale of real estate should bring the government about 95 million kuna in revenues through VAT and real estate transaction tax. “The law will also allow purchase of used properties, which is important for those areas where there is no intensive residential construction, so that people can remain living in these areas and not have to move to larger towns, which will help us achieve a sort of urban regeneration in smaller towns”, said Kuščević.

One of provisions in the law means that for each newborn or adopted child, the subsidies will be extended by two years. The maximum loan amount is limited to 100,000 euros in the kuna, with the maximum interest rate of 3.95 percent. There are no limitations in terms of fixed interest rates or loans denominated in foreign currency. However, there is a limit for the maximum price of the apartment, which is 1,900 euros per square metre, but Kuščević said that this could be changed, given the differences in the prices of real estate among, for example, Zagreb, Dubrovnik and Osijek. People will be able to buy a more expensive property, but part of the price above the threshold will not be subsidized.

The loan repayment period is up to 30 years, with the shortest period of 15 years in order to avoid possible abuse since, for example, otherwise it would be possible for a recipient to repay the whole loan in just four years, which would in practice mean that the state would have to pay half of the whole loan. “Based on contacts with the banks, I think that they see their business opportunity in this and will offer loans with lower interest rates”, Kuščević said.


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