04.09.2018

Subsidised Housing Loans

The Housing Loan Subsidy Act entered into force on July 16th, eight days after it was published in the Official Gazette. The Agency for Transactions and Mediation in Immovable Properties (ATMIP), as the competent institution, is obligated to publish relevant news and public invitations. The realisation of the program, according to some information, was expected around August 20th. However, the competent ministry and the ATMIP are careful in terms of announcing the dates of notices regarding the commencement of housing loan subsidies in official publications and the Official Gazette. During this time, as well as now, a large number of citizens have been asking for additional information and detailed terms of subsidy approvals.

ATMIP's invitation to credit institutions to submit offers for contracts pertaining to the provision of subsidised loans was published on August 7th, and the public invitation for the selection of banks offering the best terms to participate in the program was published on August 28th. The list of banks is accessible on the official website of the Ministry of Construction and Physical Planning as well as on the ATMIP's website.

Taking into consideration the fact that applications will be processed on the first-come, first-served basis, that the funds are limited (the Government has allocated 17.5 million kunas for subsidies for this year) and that up to 1,500 loans are expected to be realised for the most, citizens must immediately react in order to be fully ready once the program starts. Subsidies will be approved for purchasing houses or apartments with prices that do not exceed 1,500 Euros (VAT included) per square meter. The price may be higher but the difference would not be subsidized in those cases. The total and maximum amount of loans subsidized is up to 100 thousand Euros.

The Act states that applications for housing loan subsidies will be submitted to the bank. The bank will then have to make a decision within eight days as to whether the applicant meets the required terms and then forward the requested documentation to the ATMIP. The Agency would then evaluate the applications as complete or incomplete and make a decision whether to approve the subsidy. The Agency would then be obligated to electronically send its decision to the bank within three days.

It is important to emphasize that loan subsidies will be approved in accordance with the time completed applications are received by the ATMIP. In case of multiple applications simultaneously submitted, the approval will begin with the applications for smaller loans. Applications received prior to the publication of the commencement of the subsidy process will not be taken into consideration.

The steps prior to submitting the application include finding a suitable real estate and gathering all the necessary documentation, and concluding a preliminary agreement or a sale contract with a repayment period that would secure a full payment of the price. The loan repayment period may not be less than 15 years. Loan subsidies for purchasing real estate built as a part of the subsidised housing program will not be approved.

What most people want to know are the interest terms. The goal of this Act is to facilitate housing loan payments during the first 4 years where the Government would make half the monthly payments to banks via the ATMIP, that is, in advance for the entire calendar year. The Act also prescribes the maximum effective interest rate during the first four years up to the maximum of 3.75 percent annually. Upon the expiration of the first four years, the rate may be increased up to the maximum of 10 percent during the following two years. The interest rates differ among banks and depend on the currency the loans are taken out in. For example, Hrvatska poštanska banka offers the lowest effective interest rate for loans in Euros, while Privredna banka Zagreb offers the lowest interest rate for loans in kunas.

Everything mentioned refers to Croatian citizens under the age of 45 who do not own real estate, that is, who do not own a real estate they want to sell in order to purchase a larger one. The terms also cover the assets of common-law spouses, spouses and informal life partners. In case the applicant or a member of the household has a physical disability of at least 50 percent, the duration of the loan subsidy may be extended for a period of a year, and for a period of two years for each child born or adopted.

The following documentation is required: a copy of the identification card, a preliminary agreement or a sale contract for purchasing the real estate the subsidy is applied for, a copy of the land register excerpt, a copy of the building floor or use of the building the real estate is located in, a certificate by the Croatian Institute for Public Health regarding the registry with the Croatian Registry of Persons with Disabilities, a certified statement that the applicant (including the spouse or common-law spouse, life partner or informal life partner) does not own a real estate or owns a real estate he/she wants to sell in order to buy or build a larger real estate for the needs of own tenancy certified by a notary public. In addition, it is also necessary to gather the documentation required for loan approval that is different at each bank.

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