1. The Scheme
The Central Agency for Equal Distribution of Burdens operates the Scheme for the restoration of the pre-war solvency of the owners whose immovable property in Cyprus is in the areas occupied by the Turkish occupation forces and in the areas that are inaccessible due to the Turkish occupation forces. Through this Scheme, loans and guarantees for loans are granted to entitled persons for specific purposes.
However, it should be pointed out that, according to a provision contained in the Memorandum of Understanding between the Republic of Cyprus and Troika, the policy of granting guarantees for housing and business loans through the Central Agency, is terminated, as from 1/1/2013. Therefore, the applicants should consult any financial institution of their choice and in case they succeed in a loan approval, their application to the Central Agency will be handled through the Scheme for the subsidisation of interest rate of Housing or Business Loans with no guarantees of the Central Agency.
Overseas Cypriots are not covered by this Scheme unless they have been repatriated to Cyprus and have become permanent residents and reside permanently in Cyprus. Repatriated applicants to the Scheme must provide proof/evidence that they reside permanently in Cyprus.
2. Purposes of the Scheme
(1) Through this Scheme, the Central Agency provides loans for the following purposes:
(a) Student loans for full time studies at recognised or registered (a) higher or highest educational institutions in Cyprus or abroad and (b) post secondary educational institutions providing technical and vocational education and training in Cyprus or abroad.
(b) Business loans to individual persons or to legal business entities to establish or expand their business activity and to acquire or expand their business premises in Cyprus οr/and purchase of office equipment, machinery and share capital in a limited liability company.
(c) Medical treatment loans for serious or permanent illnesses the treatment of which is expensive.
(d) Loans to newlywed couples who submit their loan application to the Central Agency within 30 months from the date of their wedding.
The provision of loans for this purpose has been suspended for one year, as from 31/5/2013, in accordance with the Amendment Regulations of the Central Agency, published in the Gazette.
(e) Loans to associations of persons for the purchase, building or expansion of their premises, for infrastructure works and for the purchase of equipment.
2. The Scheme’s guarantees for loans are provided for the following purposes:
(1) Business loans for the same purposes as described in paragraph (2) above.
(2) Housing loans to acquire (purchase or build) in Cyprus, a privately-owned housing unit for owner occupancy and permanent residence or for the improvement and extension of such residence. Any residential unit owned by the spouse will be taken into account.
Approved applicants for Housing and Business loans guaranteed by the Central Agency, are directed to financial institutions specified by the Agency, to secure the loan.
3. Subsidised housing and business loans by a maximum of 3.5 percent of the interest rate, provided that the applicants will bear the burden of a 2% minimum interest rate.
3. Entitled Persons
Entitled persons are (a) citizens of the Republic of Cyprus who are permanent residents in Cyprus and reside permanently in Cyprus or (b) Cypriot legal entities, as follows:
(1) A citizen who immediately before the Turkish invasion was and still continues to be the owner of the same occupied or inaccessible immovable property.
(2) A citizen who after the Turkish invasion has become and continues to be the present owner of occupied or inaccessible immovable property by inheritance or endowment (gift) provided that the current owner and all previous owners after the invasion and also the owner immediately before the invasion are related between themselves by blood or by adoption in direct line or indirectly up to the third degree. Examples: (a) A son inherits property from his father who was the pre invasion owner. (b) A son inherits property from his father who was the post invasion owner but who also had inherited this property from his own father who was the pre invasion owner. (c) A nephew inherits property from his uncle who was the pre invasion owner.
Entitled person is also the spouse of the owner of occupied property or inaccessible immovable property (in accordance with paragraphs (1) and (2)), and the direct blood relatives or relatives by adoption in direct line or indirectly up to the third degree. In such case, these persons can apply to the Scheme provided they have the consent of the present owner of the occupied/inaccessible immovable property.
Clarifications: Direct blood line relatives means father – son/daughter – grandchildren, etc. Indirect blood line up to third degree relatives means brother to brother, uncle to nephew (child of the uncle’s brother).
(3) A citizen who after the Turkish invasion became and continues to be the owner of occupied or inaccessible immovable property after the dissolution of a legal entity which was the owner of this property immediately before the invasion. A citizen is an entitled person if (a) he was a shareholder of that legal entity immediately before the invasion and until its dissolution after the invasion or (b) he became a shareholder after the invasion in the same way referred to in paragraph (2) above.
(4) A citizen who is a shareholder of a Cypriot legal entity which immediately before the invasion was and still continues to be the owner of the same occupied or inaccessible immovable property.
A citizen is an entitled person if (a) he was a shareholder immediately before the invasion and continues to be one or (b) he became a shareholder after the invasion in the same way referred to in paragraph (2) above, and (c) the legal entity is entitled to and decides to mortgage the occupied or inaccessible immovable property for the benefit of its citizen shareholder. The value of the property offered for mortgage will not exceed proportionately the percentage shareholding of the shareholder in the share capital of the legal entity.
(5) A Cypriot legal entity that immediately before the invasion was and continues to be the owner of the same occupied or inaccessible immovable property.
(6) Associations, Organisations and Unions of persons that immediately before the invasion were and continue to be owners of the same occupied or inaccessible immovable property.
4. Basic conditions for the acceptance and examination of applications
(1) Applications are accepted only on application forms of the Central Agency, which are available at the offices of the Central Agency, the Citizen Service Centres and Central Agency’s website.
There is a separate application form for each purpose of loan.
(2) The applicant must be the entitled person who will make use of the loan (e.g. the student, the person to be housed etc). When the application form is completed it must bear the applicant’s signature on the relevant page of the form as well as of the owner(s) of the occupied or inaccessible immovable property.
(3) All the relevant information and particulars must be filled in and the required certificates or substantiating data asked for in the application form must be attached.
The Central Agency, can, if it deems necessary, ask the applicant to give any other additional particulars, evidence or information in order to facilitate the examination of the application.
5. Basic conditions for the approval of applications
(1) The applicant must show, and there must be, a reasonable need for the purpose for which he is seeking provision of the loan so that the Central Agency may be sufficiently satisfied as to the existence of the reason or the object of the purpose for which the provision of a loan is sought.
(2) The potential of the applicant to pay off the loan will be examined and to what extent the security which he is providing against the loan complies with the Regulations and is considered satisfactory.
6. Amount of loan or guarantee or subsidisation of interest rate
(1) The amount of a loan advanced or of a loan guarantee or subsidisation of interest rate for housing and business loans can amount in total either up to the sum which represents 80% of the value of the occupied or inaccessible immovable property of the owner at current prices or to the sum of up to €85.000, whichever of these two amounts will be the lowest.
If the applicant is a refugee, the maximum amount granted for housing purposes is €130.000 and in the case of business or student loans the amount cannot exceed €105.000.
Refugee applicants who are not owners of occupied property but their spouse is, are treated as non-refugees, as to the amount of the loan they are eligible to receive.
It is noted that applicants whose mother is a refugee are considered as refugees by law.
If the applicant is not a refugee, the maximum amount to be granted may amount to 80% of the value of the occupied or inaccessible immovable property or up to €85.000, whichever of the two amounts is the lowest, followed by a deduction of 20% to 40%, depending on the level of income and wealth of the applicant and his family in the non-occupied areas in combination with the value of the occupied and / or inaccessible property.
In cases where, one of the applicant’ s parents is a refugee the percentage of deduction will not exceed 20%.
Subject to the above mentioned ratios, the maximum amount for repairs, improvements and / or extensions to existing dwellings in order to become appropriate for residence, shall not exceed €50.000. Subject to the above mentioned ratios, in cases where the entitled person is a shareholder of a Cypriot legal entity, the amount of a loan or guarantee shall not exceed his/her equity capital in the legal entity in relation to the assessed value of the entire occupied or inaccessible immovable property of the legal entity.
Within the above general loan framework, the maximum amount to be granted for loan or loan guarantee is as follows:
Loan capital of the Central Agency
- Student loans: up to €105.000.
- Medical loans: up to €85.000.
- Loans to newlywed Couples: up to €17.000.
This kind of loan is over and above the maximum amount received for housing purposes.
- Business loans: up to €70.000.
- Loans to Associations, Organisations and Associations: up to €100.000 for acquisition, construction, expansion of premises and infrastructure (i.e stadium) and equipment.
Loans guaranteed by the Central Agency
- Housing loans: up to €130.000.
The maximum amount to be granted is subject to the size of the house. Specifically, for houses with a total area over 275 square metres, threre is a 50% deduction of the entitled loan amount.
In the calculation of the total area, the following are excluded:
The boiler room up to 5 square metres, the storage rooms up to 7 square metres, the covered parking places up to 36 square metres, the covered verandas up to 40 square metres and covered out buildings constructed due to altitude asymmetry.
- Housing loans for refurbishing and/or extensions of premises: up to €50.000.
- This kind of loan is over and above the maximum amount received for housing purposes.
- Business loans: up to €105.000.
Subsidised interest without guarantees by the Central Agency
- Housing loans: up to €130.000.
- Business loans: up to 105.000
(2) In determination of the amount of the loan or loan guarantee or the amount of the loan whose interest rate is to be subsidised, the following shall be taken into account:
(a) The total net annual family income as follows:
(i) Between €80.000 and €100.000 a 10% deduction is made to the entitled loan amount and
(ii) from over €100.000 a 20% deduction is made to the entitled loan amount.
(b) The current general financial condition of the applicant.
(c) The ability of the applicant to repay the loan.
(d) The need, justification and documentation of the purpose and amount of expenditure for which the loan is sought.
It is noted that according to the Amendment Regulations of the Central Agency, published in the Gazette on the 31/5/2013, futher deductions of the entitled amounts will apply for one year, as follows:
Student and Housing loans
Refugees - 10%
Non Refugees - 25%
Refugees - 15%
Non Refugees - 25%
Non Refugees 20%
Assessment of the value of occupied or inaccessible property at current prices: The Title Deeds or Certificates of the immovable property included in each application are sent by the Central Agency to the Land Registry Office for assessment of their value at current prices. This assessment is made exclusively by the Land Registry Office and solely for the purpose of the advancement of a loan by the Central Agency through the Solvency Scheme.
7. Loan Conditions
The conditions of advancing a loan whether directly from the Central Agency or through specified financial credit institutions or the subsidisation of the interest rate, include the following:
(1) The loan interest rate will be subsidised by the Central Agency by 3,5 units. However, the interest rate of the business loans with Central Agency’s capital will be subsidised up to a maximum of 3.5% provided that the applicants will bear a 3% minimum interst rate.
(2) The period of paying off the loans granted direcltly from the Central Agency, the housing loans guaranteed by the Central Agency as well as the period of subsidisation for the housing loans, may be up to 20 years.
(3) The period of paying off the business loans guaranteed by the Central Agency, as well as the period of subsidisation for the business loans may be up to 15 years.
(4) Payment will be by equal monthly amortisation instalments.
(5) A period of grace of up to 2 years may be granted during which only the loan interest will be paid. In the case of a study loan, the period of grace is extended to the normal total duration of the years required for the completion of the course plus one year provided that the total period of grace and repayment of the loan will not exceed 20 years. In case of long term studies, the Central Agency may extend the total period of grace and repayment beyond 20 years.
During the grace period, interest payments will be made in equal monthly instalments.
(6) Subsidisation by a maximum of 3.5 percent of the interest rate of housing and business loans of entitled persons, provided that the applicants will bear the burden of a 2% minimum interest rate.
(7) The provision of a loan or loan guarantee, according to the case, will be combined with:
(a) The mortgage of occupied or inaccessible immovable property of the owner to the Central Agency.
(b) The provision of personal guarantees.
(c) The mortgage of immovable property in the free areas of Cyprus if the applicant so wishes. The obligation to mortgage occupied inaccessible property will be waived or reduced in proportion to the extent to which the loan or guarantee will be covered by mortgaged property in the free areas.
(d) The provision of surety in the form of an encumbrance on movable property which will be acquired with a loan for business purposes.
8. Central Agency for Equal Distribution of Burdens’ Scheme for the subsidisation of interest rate of Housing and Business Loans with no guarantees of the Central Agency
(1) The Scheme
The Central Agency subsidises by a maximum of 3.5 percent, the interest rate of housing and business loans, at any financial institution, provided that the applicants will bear the burden of a 2% minimum interest rate, they have submitted an application and have been assessed as entitled persons, in accordance with the provisions of the regulations of the Central Agency for Equal Distribution of Burdens (Draft Rehabilitation pre-war Solvency ) and based on the general criteria approved by the Cabinet.
(2) Purposes of the Scheme
The purpose of the Scheme is to subsidise by a maximum of 3.5 percent the interest rate of housing and business loans of entitled persons, provided that the applicants will bear the burden of a 2% minimum interest rate, for the following purposes:
(a) Αcquisition in Cyprus of an appropriate privately-owned residential unit for owner occupancy and permanent residence or for necessary / substantial improvements or additions to an existing residential unit in Cyprus to make it suitable for permanent residence.
(b) Αcquisition and/or expansion and/οr renovation of privately-owned business
premises or renovation of rental business premises in Cyprus οr/and purchase of office equipment and/οr machinery and/οr share capital in a limited liability company.
(3) Entitled Persons
Entitled Persons are:
(a) Αpplicants who have secured a housing loan from any financial institution no later than six months before the submission of an application to the Central Agency, or intend to secure such a loan once their application is approved, with personal guarantees or mortgage on property in the non-occupied areas of the Republic.
(b) Αpplicants who after the submission of an application to the Central Agency and before its approval, have secured a business loan from any financial institution or intend to secure such a loan once their application is approved, with personal guarantees or mortgage on property in the non-occupied areas of the Republic.
(4) Criteria for the Implementation of the Scheme
In addition to the existing general criteria and the criteria for granting housing loans guaranteed by the Central Agency, which will apply mutatis mutandis to the implementation of the Scheme, the following criteria also apply.
(a) The Central Agency will subsidise by a maximum of 3.5 percent only the interest rate of the loan of the entitled applicants, provided that they are in line with the established criteria but will always bear a 2% minimum interest rate. However, if the total interest rate is less than 2 percent the Central Agency will not subsidise the loan.
Each year, the applicants must present to the Central Agency a bank statement regarding the interest rate charged on their loan in order to enable the calculation of the interest rate percentage to be subsidised.
(b) The amount of the subsidised rate will be deposited to the financial institution annually, at the beginning of each year, by the Central Agency in equal instalments according to the repayment period of the loan approved by the Central Agency and not in accordance with the repayment period of the loan approved by the financial institution,
(c) The amount of the subsidised interest rate will be calculated on the current outstanding balance of the loan, at the time the application is evaluated, subject to consistent repayment.
(d) In cases where legal action is taken against the applicant, by the financial institution, for late payment of instalments of a housing loan, the payment of the subsidy will be suspended, whereas in the case of business loans the subsidy will be terminated.
(e) Where repayment of the loan has commenced before the approval of the application, the Central Agency shall subsidise the interest rate of the current outstanding balance of the loan at the time of approval and not on the initial amount of the loan.
(f) The Central Agency will not guarantee in any way the repayment of the loan of the applicant.
(g) The applicant is not required to mortgage the occupied or inaccessible property in favour of the Central Agency.
(i) In order to achieve the objectives and purposes of the scheme, the inclusion of all applicants who have secured a housing loan by the time their application is evaluated or intend to do so after being approved, is mandatory.
9. Resources available for the Scheme
The provision of loans, loan guarantees and subsidised interest loans through the Scheme will always depend on the available resources of the Central Agency for the Scheme.
10. Revisionary Authority of the Central Agency
Applicants who disagree with the decision of the Board of Management regarding their application, may file an appeal to the Revisionary Authority against the Board’s decision. The appeal must be made within the period of 30 days from the date of notification of the decision of the Board to the applicant.
The appeal must be in writing and be addressed to the President of the Revisionary Authority and set out the reasons for the appeal.
The Revisionary Authority examines the appeal and, having heard the views of the interested parties, decides on the appeal.
11. Further information
Site on the internet: www.kentrikosforeas.org.cy