Words: Ashley Rigg
Published: 30th November 2009
Protesters accuse industry of greed & nepotism
English, Greek and Russian property buyers accused Cypriot banks and developers of greed and nepotism this weekend at a demonstration in Paphos, the country’s capital city.
The protestors claim buyers were deceived into buying property on land that developers had mortgaged, often with mortgages approved from the same bank the developer holds its mortgage with.
Undisclosed risk
Although almost all developments are financed to some degree by bank loans, it seems a minority of developers in Cyprus got greedy and did not repay outstanding loans on the land they had completed developments on. In the good times, banks lent money to buyers on these developments knowing there was another mortgage outstanding, but without notifying the buyer of the additional risk.
As the economic crisis unfolded and a number developers called in the administrators, homeowners were unknowingly left with an additional debt which put their homes at risk.
Investor anger
A protestor told Nigel Howarth of Cyprus Property Magazine:
“The property industry in Cyprus is built on greed and nepotism. The developers borrow money from the bank using people’s homes as collateral and the banks and lawyers are part of the deception. I have proof that my home has been mortgaged by my developer, but the people in there (pointing at the bank) refuse to tell me anything.”
Minority giving the industry a bad name
“This is a case of a minority of people in the boom years giving the industry a bad name” says Costa Ouloupis, founder of Cypriot developer Enterprise Cyprus. “Every time I make a sale, I pay back the proportion of the debt that I owe on the land as part of my loan agreement with the bank. This sort of arrangement did not always happen in the boom years and a few developers may have taken advantage of the lax lending rules” he says.
Regulate the banks
There clearly an issue with regulation and transparency in Cyprus but ultimately it is the banks that must shoulder the lion’s share of responsibility. Before granting buyers loans they should surely be required by law to clearly explain the outstanding liabilities and the risks associated with buying into a development. Regulation such as this would have stopped the problem at source.
Further coverage on
Cyprus Property Magazine.
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