Estonia: Kredex to start offering new loan for apartment building renovations

  • 2020-05-25
  • BNS/TBT Staff

TALLINN - Apartment associations are able to apply for a renovation loan in the sum of up to three million euros per association from the state credit foundation Kredex from Monday if banks have previously refused them loans or if the conditions offered are unreasonably costly.

Triin Reinsalu, head of the department for dwellings and energy efficiency at Kredex, said that the number of apartment association that are seeking to renovate their building but are seeing their loan requests rejected by banks has been increasing over the past years, which is why said associations must be offered additional loan options in order for the market barrier to be mitigated, according to Kredex. 

The sum allocated for apartment building renovations as part of Kredex' crisis mitigation package totals 98 million euros. 

"The creation of this new renovation loan was prompted by the apartment associations' need and feedback. In some regions, apartment associations are not granted the bank loan they need because of the low market value of real estate," Reinsalu said. 

"We are not planning to compete with banks but instead assist those apartment associations to which the conditions offered by banks are either not suitable or whose requests have been denied. It is important that all apartment associations should have the option to renovate their building and improve the energy efficiency thereof regardless of their location in Estonia," she said.

Renovations eligible for loans range from small scale construction works to comprehensive renovation. The loan can also be combined with Kredex' renovation support, Reinsalu said.

Kredex' renovation loan is aimed at sustainable and creditworthy apartment associations. The prerequisites for a positive loan decision are that an earlier loan application has been rejected by the bank or that a loan has been offered on unfavorable conditions, such as an overly short term or higher than normal interest rate.

The application for a Kredex renovation loan must include rejections by at least two banks and a decision by the general meeting of the association on taking out a loan for renovations.

The loans are issued to apartment associations for a term of up to 20 years and range from 15,000 to three million euros. The share of own financing is generally 5 percent with the interest rate starting from 3 percent per year plus the 6-month Euribor.

Kredex will continue making the emergency loan decisions until the end of 2020.