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Housing support vehicle Prolog S.A. now operational
Published on 07 July 2024
In response to the housing crisis, five Luxembourg banks have created a support mechanism for the residential property sector with a view to increasing the supply of completed homes. Announced at a press conference on 22 May 2024 in the presence of Finance Minister Gilles Roth, this mechanism, a Special Purpose Vehicle (SPV) in the form of a limited company called Prolog S.A., is now operational. This approach complements the government’s measures to boost housing.
Summary
The importance of revitalising the housing sector
“Since the beginning of this year, our members active in the residential housing finance market have seen a certain revival of interest in mortgage loans,” says Jerry Grbic, CEO of the Association des Banques et Banquiers (ABBL). “However, this interest is concentrated on existing homes and not on VEFA (VEFA future state of completion) projects, and the recovery in the market is still too weak to meet the national housing challenge”. What is at stake here is, first and foremost, access to housing, but also the country’s ability to attract the talent it needs for its economy, and lastly, the future of jobs in a sector on which thousands of households depend: the construction industry.
Bringing added peace of mind
The idea for the SPV Prolog S.A. was launched at the national housing meeting held on 22 February at the Château de Senningen. It was created by the four founding banks, Spuerkeess, Banque Internationale à Luxembourg (BIL), Banque Raiffeisen and Société Nationale de Crédit et d’Investissement (SNCI), now joined by Banque de Luxembourg. Its aim is to unblock the situation of properties where construction has started but which cannot be put on the market due to a lack of sufficient pre-sales.
The promise to purchase that Prolog S.A. provides brings predictability: for buyers who have already invested in the project. For developers who wish to complete their construction. For the tradesmen who have been appointed. And finally, for potential buyers. Everyone will know that the project is going to be achieved.
Jerry Grbic
CEO, ABBL
A 7-phase process
- Phase 1: The developer obtains the necessary permits and markets the units in its residential development.
- Phase 2: Some of the units are sold on a VEFA (VEFA future state of completion) basis, but because the number of units sold is insufficient, the developer is unable to obtain the necessary financing from its bank. Construction cannot begin.
- Phase 3: The developer can submit his project to Prolog S.A. via one of the participating banks, so that Prolog S.A. can commit to buying (via an option) the unsold properties at a discount (to be defined on a case-by-case basis).
- Phase 4: Prolog S.A’s Investment Committee analyses the project. The conditions to be met include the following – the project presented must be viable and meet market needs (e.g. luxury flats excluded). – a pre-sales threshold of 50% of the programme has already been reached.
- Phase 5: Thanks to Prolog S.A.’s commitment, the developer will be able to obtain the financing he needs from his bank to complete the project.
- Phase 6: Construction can begin. At the same time, the developer continues to sell unsold units freely on the market.
- Phase 7: If any units remain unsold at the time of completion, the developer asks Prolog S.A. to acquire them with a view to their subsequent resale by the SPV.
Jerry Grbic
CEO, ABBL
Published on 07 July 2024