Editor’s note: This article was first published in July 2010. The ICO credit line terms (80% financing, 4-year term, 3-year drawdown, margin of about 2.5%) and Euribor at “around 1.38%” describe a 2010 programme. Martinsa-Fadesa, cited as a beneficiary, had filed for insolvency in 2008 and was later liquidated.
The Instituto de Crédito Oficial (ICO), Spain’s state-owned financial agency, is opening the tap for the property development sector. Until now its credit line was limited to the construction of subsidized housing for rent (VPO, viviendas de protección oficial). From now on, the financing is available for subsidized homes built both for rent and for sale. What does this new credit line involve?
Developers will be able to borrow up to 80% of the maximum sale price, or the same percentage of the appraised value if that is lower.
The loans will have a 4-year term, with the principal repaid at maturity. The drawdown period will be 3 years.
The interest rate will be set by the Euribor, which currently stands at around 1.38%, plus a minimum annual margin of roughly 2.5%, although the margin would be determined by the developer’s creditworthiness.
The average investment per square meter in subsidized housing is around €600, so only companies with low land costs per square meter will be able to make this credit line pay off. These are the companies that stocked up on land early on, before it was burdened by the various tendering costs.
The measure gives some breathing room to companies such as Martinsa-Fadesa, whose land cost is about €300 per buildable square meter.
Even so, it’s good news for the construction sector.
Further reading
Featured image: rene boulay, CC BY-SA 3.0, via Wikimedia Commons.
