© AFP
This special purpose entity consists of a new company launched by several Luxembourg-based banks seeking to invest in apartments and other housing projects which might otherwise not see the light of day.
Luxembourg's housing situation remains in crisis. The country's banks have noted that interest in purchasing older homes has increased slightly, while the sale of new-build flats remains at a low point, with negative knock-on effects on the nation's economy and on its banking sector.
The Spuerkeess, BIL, Raiffeisen and the SNCI investment bank have now joined forces to launch a special purposes entity with the aim of purchasing new-build apartments and investing in projects which otherwise might not get off the ground. The plan is to actively enter the real estate market with an investment of €250 million, in the hope of breathing new life into Luxembourg's housing market in the short term.
The entity will target projects which have already achieved a state of pre-sale, but are missing 20% or 30% to reach the required threshold for guaranteed completion, which is usually 80%, according to ABBL CEO Jerry Grbic.
The VEFA properties (vente en l'état futur d'achèvement, or sale in future state of completion) must meet certain conditions in order for the entity to purchase them. Luxurious penthouses, for example, or student accommodation will not be included. The entity will also not pay the full asking price; instead, developers must agree to a discount off the market price, but are permitted to sell the property themselves at a better price if they should find a buyer.
Although the government has no direct involvement with the project, the Minister of Finance Gilles Roth praised the initiative, saying the developers should not benefit, but that people who work in the housing sector would be able to keep their jobs. The plan would also increase the properties on offer, helping prices to stabilise.
The participating banks emphasised the plan would be a temporary measure running until 2025 at the very latest. They did not wish to become long-term shareholders in the housing market, but instead the initiative should seek to unblock selected housing projects so construction could begin once more.
Although the initiative represents new ground for the banks, who described the plan as a "test" during a press briefing, they are optimistic that the measure will help to address the ongoing housing crisis.
BGL BNP Paribas joins the project
On Wednesday evening, the BGL BNP Paribas published a statement to announce they would also join the initiative, pledging up to 100 million euros. This brings the overall investment to roughly €350 million, which could ensure up to 350 new properties are completed.
