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€750m loans fund to help small builders in Ireland

A new state funded loans scheme in Ireland is expected to help SME developers build up to 7,500 new homes during the next five years.

The Irish property scheme is intended to help builders who have been unable to secure loans from traditional sources such as high-street banks.

The terms of the fund which is named Home Building Finance Ireland (HBFI) will see builders gain access to loans to be repaid over a 5-year period with a maximum limit of a £35m loan per company. The scheme will fund developments delivering between 10 and 200 homes.

In order to apply to the fund, the developer needs to have already submitted or secured planning permission for the development site, and the site must pass a commercial viability assessment by the HBFI.

Developers are also required to commit a minimum of 20 per cent equity for the project, but the value of the development site may be included.

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The HBFI can provide anywhere between 50 and 80 per cent of the development project funding with a commercial market interest rate of 5-8 per cent.

Even though the Irish property scheme was announced in the 2018 Budget plans over a year ago, it has only just become official and signed into law. The hope is the scheme can cover the need of small and medium size builders, who are struggling to finance their projects via traditional methods.

Paschal Donohoe, Minister for Finance believes people should not see this approach as the state taking on risky loans that the banks do not want to take on.

Mr Donohoe stated that the HBFI are looking to address a market opportunity where commercial lenders were not showing much interest in lending to small development projects with lower potential returns.

Another positive from small builders is that the HBFI will be able to help smaller firms make their loan applications, which is not usually something the major banks do.

HBFI are certain that the organisation will only lend money to viable projects to deliver profits that would go back into the State budget.

Specialists in Construction Insurance

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