House poised to pass bill to sweeten sale of debtors’ homes

 

MPs of the ruling Disy party sounded upbeat on Monday that a series of bills granting tax relief to bank debtors would make it through the plenum.

The House finance committee was discussing five bills which aim to give incentives to people who wish to sell their house as part of restructuring their debt with a bank or to settle a non-performing loan (NPL).

Under the proposals, these persons would be exempt from paying income tax, capital gains tax, property transfer fees, stamp duty and the special defence contribution.

Crucially, the bills under discussion also cover cases where borrowers sell their house on the market, and not just via a debt-for-asset swap with a bank.

Disy leader and MP Averof Neophytou said the legislative proposals had gathered enough momentum in committee, so that it was decided to table them to a plenary session.

Neophytou brushed off concerns that the proposed legislation might incentivise bank debtors who are currently consistent with their payments, to become delinquent so that they can benefit from the tax relief offered.

“No serious lawmaker would author a bill opening a backdoor NPLs to skyrocket,” the Disy boss said.

He noted that the legislation contained safeguards, such as that it would apply only to debt which was classified as non-performing as at December 31, 2015.

“We wanted to cover borrowers who, due to the financial squeeze, were unable to cope with their loan payments…it is not our goal to provide strategic defaulters an additional tool,” he said.

“And we at Disy will be very harsh on these strategic defaulters,” he added.

The purpose of the legislation is to “help borrowers, poor people, small and medium-sized businesses who, because of the economic crisis, could not temporarily keep up with their instalments”.

For their part, main opposition Akel were sceptical about who would ultimately benefit.

MP Stefanos Stefanou said it was disconcerting that, despite repeated calls, both the finance ministry as well as the Central Bank have failed to provide detailed data on NPLs.

“Knowing the overall value of NPLs is not enough. We need to know what percentage do these strategic defaulters account for, and who these people are.”

The International Monetary Fund, the European Central Bank and the European Commission have warned Cyprus of the dangers of not reducing NPLs on banks’ balance sheets. They say that the slow pace of NPL reduction is chiefly due to a weak foreclosures system.

According to the latest available data, delinquent loans in the Cypriot banking system are at €22.1bn.

 

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