Alpha Bank loses Swiss Franc loan court action

THE ALPHA BANK recently failed in its court action against a British national, ‘xxx Johnson’, who it accused of failing to comply with the obligations of his Swiss Franc loan agreement concluded with the bank in August 2008.

(Regular readers will recall that in 2016 the Cyprus Consumer Protection Service (CCPS) fined Alpha Bank Cyprus €250,000 for its business practices relating to mortgage agreements.)

In his defence, Johnson argued that the loan agreement was unenforceable as the Alpha Bank ‘forced’ him into the Swiss Franc loan agreement and, by failing to explain the risks associated with foreign currency loans, the bank violated Article 4(2) of the European Directive 93/13/EEC of the 5th April 2003 on unfair terms in consumer contracts.

One of the witnesses who gave evidence on behalf of the bank who was present when the loan agreement was signed acknowledged that there are risks in foreign currency lending – and pointed out that it’s the bank’s usual practice to explain the risks to borrowers. However, he did not know whether the risks had been explained to Johnson.

Johnson explained that he was not an expert in financial matters and that the bank had advised him to take a Swiss Franc loan because of its low interest rate. All the bank told him that the loan would be for CHF 302,000 repaid with 175 tranches of CHF 2,274.96. At no time did the bank advise him of any risk and, in particular, that his monthly instalments would increase if the Euro depreciated against Swiss Franc.

Furthermore, the bank did not give him enough time to read and understand the loan agreement or the opportunity to discuss it with a lawyer or financial adviser to explain the terms and consequences of a Swiss Franc loan.

The judge agreed that Johnson would be unaware of the inherent risks associated with foreign currency loans and, furthermore, the bank had failed to provide any evidence to the court confirming that it had advised him accordingly.

Following various legal arguments and rulings in related cases (one of which was a judgement of the European Court of Justice), the judge rejected the bank’s claim and awarded costs to Johnson.

Further reading

Alpha Bank Cyprus Ltd ?. Johnson ?.?., ????? ??.: 1267/2012, 29/3/2019 (Court decision – Greek)

Editor’s notes

Although the Larnaca court’s ruling looks positive, Alpha Bank Cyprus may appeal.

This ruling by the Larnaca court does not set a precedent – only rulings by the Supreme Court can set a precedent.

Last month, Greece’s Supreme Court overwhelmingly ruled that some 70,000 who took out loans in Swiss Francs will have to repay them at the current exchange rate. See Swiss franc loan court decision in favour of banks.

 

Building permits issued for 576 new homes

Cyprus: Building permits issued for 576 new homesTHE TOTAL number of building permits authorised in Cyprus during February 2019 stood at 525 compared with the 481 authorised during February 2018; an increase of 9.1% according to official figures released by the Cyprus Statistical Service and provided for the construction of 576 new homes.

Compared to February 2018 the total value of these permits rose by 64.7% to €168.4 million and their total area rose by 67.0% to 177.9 thousand square metres.

During February 2019, building permits were issued for:

  • Residential buildings – 397 permits
  • Non-residential buildings – 75 permits
  • Civil engineering projects – 12 permits
  • Division of plots of land – 35 permits
  • Road construction – 6 permits

Building permits for new homes

The 397 residential building permits approved in February 2019 provided for the construction of 576 new homes (dwellings). These comprised 296 single houses (compared with 256 in February 2018) and 101 multiple housing units including apartments, semis, townhouses and other residential complexes (compared with 78 in February 2018).

Of those 576 new homes, 236 are destined for Limassol, 176 for Nicosia, 100 for Larnaca, 56 for Paphos and 8 for Famagusta.

Building Permits Issued for the Construction of New Homes
(Number of Dwellings)

Month 2018 (Dwellings) 2019 (Dwellings) Increase/Decrease %age Change
January 476 548 72 15.1%
February
431
576 145 33.6%
Totals 907 1,124 217 23.9%

Annual figures

During the first two months of 2019, 1,069  permits were issued compared to 984 in the corresponding period in 2018; an increase of 8.6%, while their total value and area increased by 15.6% and 22.4% respectively.

The 6,408 permits issued in 2018 provided for the construction of 2,122 new homes in Nicosia, 2,032 in Limassol, 964 in Larnaca, 646 in Paphos and 437 in Famagusta.

According to the Cyprus Statistical Service, building permits constitute a leading indicator of future activity in the construction sector.

Cyprus strong growth momentum continues but…

Cyprus strong growth momentum continuesCYPRUS economic growth is expected to remain strong, driven by domestic demand, but downside risks are on the rise, according to the European Commission’s Spring Economic Forecast, which were discussed today at the College of Commissioners and presented by Pierre Moscovici in Brussels.

According to the forecast for the Cyprus economy, GDP will continue to grow at 3.9% in 2018, 3.1% in 2019 and 2.7% in 2020, while unemployment will drop from 8.4% 2018 to 6.7% in 2019 and 5.9% in 2020.

Debt is down from 102% in 2018 to 96.4% in 2019 and 98.9% in 2020 while the -4.8% deficit in 2018 is again turning into a surplus of 3.0% in 2019 and 2.8% in 2020 without a policy change .

The Commission warns against negative risks to the financial perspectives related to “uncertainties about the macroeconomic outlook, the effects of court decisions on past measures on public sector wages, and the potential shortage of public healthcare providers first years of the national health insurance scheme “.

Cyprus’ economic expansion is set to remain robust, driven by domestic demand, but risks are tilted to the downside. Inflation is forecast to remain subdued. The budget is expected to return to surplus and public debt to steadily decline from 2019 onwards. Risks to the fiscal outlook are also mainly on the downside.

Solid growth but increased downside risks

Cyprus continues to enjoy a remarkable post-crisis rebound with real GDP growth of 3.9% in 2018. Growth is forecast to ease to 3.1% this year and 2.7% in 2020 as the external environment turns less favourable and the private sector continues to deleverage.

Private consumption remains a key growth driver due to rapid employment growth. Employment in 2018 rose by 4% and more recent labour market indicators remain favourable. The unemployment rate fell to 7.1% in February 2019, with a significant reduction in long-term unemployment. Wages increased moderately over the previous year and are set to continue rising, with employers in several sectors scheduled to renegotiate wages with unions amid tightening labour market conditions. Public consumption is also set to provide support to growth, driven by the automatic indexation of public wages, wage increments and the unfreezing of promotions.

Investment is forecast to be robust, growing more strongly than the overall economic activity. An important part of investment comes from ongoing tourism-related projects. Other investment projects relate to residential construction, with half of all transactions in the sector driven by foreign demand, which in turn is supported by the Citizenship by Investment programme. Finally, a large share of investment in Cyprus is associated with ship registrations. These are inherently volatile but more likely to increase following efforts to strengthen the shipping sector in the country.

Net exports are projected to be a drag on economic growth. Imports are set to increase reflecting the large import content of domestic demand. Meanwhile, exports in Cyprus are dominated by services and the largest share of services is linked to tourism. The outlook of tourism-linked services is clouded by the recent bankruptcies of several airlines servicing Cyprus, slowing global demand, fierce competition, and high Brexit-related uncertainty (UK citizens account for more than a third of all tourists).

Risks to the outlook are tilted to the downside. As a small open economy, Cyprus would be exposed to strong headwinds from slowing global growth. The economy’s heavy reliance on foreign funding also leaves it vulnerable to external developments.

Headline HICP inflation in 2018 was 0.8%, almost the same as it was in 2017 (0.7%). Inflationary pressures came mainly from energy and unprocessed food categories, while core inflation fluctuated around zero. Two factors seem to provide some explanation for this. First, the increasing competition among wholesalers, retailers and internet platforms, as well as the absence of legislation on when shops can offer sales, is weighing on prices. Second, although the unemployment rate has fallen sharply in recent years, the fastest job creation occurred in low-paid sectors and there is still significant slack in the labour market to be absorbed. Inflationary pressures are thus expected to remain subdued.

The general government headline balance is expected to return to surpluses of around 3% of GDP in 2019 and 2020, after posting a temporary deficit of 4.8% of GDP in 2018. This was entirely due to the one-off support measures related to the Cyprus Cooperative Bank sale. The underlying fiscal performance is projected to remain strong, on the back of the supportive macroeconomic environment and the improving labour market.

The general government surplus is forecast to reach 3.0% of GDP in 2019. Revenue is forecast to continue increasing, mainly as a result of a sizable rise in social security contributions, partly offset by a reduction in the excise duties on fuel and the revision of vehicle taxation. Compared to public expenditure net of one-offs in 2018, expenditure is forecast to rise at a higher rate than revenue. This is mostly due to deficit-increasing measures, such as the gradual increase in public wages to reverse wage cuts implemented after the crisis, the Estia scheme to support non-performing loan repayment and the government’s support for low-income pensioners. The forecast takes into account the start of contributions to the national health insurance system as of March 2019 and the inclusion of the two entities resulting from the sale of the Cyprus Cooperative Bank within the general government sector. Under a no-policy-change assumption, the general government surplus is forecast to narrow slightly to 2.8% of GDP in 2020. The structural budget surplus is set to decline over the forecast period from 2% of GDP in 2018 to around 3?4% in 2020, mainly due to the positive output gap.

The main downside risks to the fiscal outlook relate to uncertainties surrounding the macroeconomic outlook, the outcome of court rulings on past measures concerning the public sector wage bill and the potential deficit of public healthcare providers during the first years of the national health insurance system. Positive cash balances from the resulting CCB entities constitute an upside risk.

After increasing considerably to 102.5% of GDP in 2018, due to the government’s one-off support for the Cyprus Cooperative Bank sale, public gross debt is forecast to steadily decline to below 90% of GDP by 2020. The decrease is mainly due to projected primary budget surpluses and strong nominal GDP growth.

Further reading

European Commission: Economic forecast for Cyprus spring 2019

Cyprus property sales at eleven year high

APRIL saw a sharp rise in Cyprus property sales compared to the numbers sold in the corresponding month last year, with the number of contracts deposited at Land Registry offices up 61% according to the Department of Lands & Surveys.

During April a total of 1,057 contracts were deposited at Land Registry offices for the sale of commercial and residential properties and land compared with 655 in April 2018 – and the biggest monthly figure recorded since September 2008 when 1,157 contracts were deposited.

Of those 1,057 contracts, 628 (59%) were deposited by Cypriots and the remaining 429 (41%) by non-Cypriots – 123 of whom were EU citizens and 306 non-EU citizens.

Property sales rose in all districts and the figures show a continuing improvement in the economic sentiment.

A rush by foreign nationals to acquire Cypriot passports via the citizenship-by-investment scheme before tougher criteria come into force on 15 May could also have helped to boost sales.

(Further details of the revised scheme may be found at Cyprus Investment Programme.)

Sales rose in all districts. In percentage terms, Famagusta led the way with sales up 85%, followed by Limassol with a rise of 74%, while sales in Larnaca, Nicosia and Paphos rose by 69%, 44% and 43% respectively.

Total Property Sale Contracts – 2018/2019 Comparison

District Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Nicosia 2018 146 96 126 117 153 146 176 91 118 145 161 131
2019 161 194 131 169
Famagusta 2018 48 52 40 52 79 61 61 50 45 57 47 48
2019 53 48 45 96
Larnaca 2018 112 99 116 83 113 133 112 94 121 116 143 103
2019 114 125 118 140
Limassol 2018 225 256 314 246 282 338 314 262 251 289 344 290
2019 251 256 287 428
Paphos 2018 164 163 172 157 201 180 233 156 152 204 230 230
2019 187 211 185 224
Totals 2018 695 666 768 655 828 858 896 653 687 811 925 800
2019 766 834 766 1,057

Property sales – year to date

During the first four months of 2019 sales rose 23% compared to the same period last year. Sales in Nicosia rose 35% and sales in Famagusta rose 26%. Meanwhile sales in Paphos rose 33%, while those in Larnaca and Limassol rose 21% and 17% respectively.

Domestic sales

Sales to the Cypriot market shot up 91% in April compared to April 2018, with significant rises in all districts. In percentage terms Famagusta led the way with sales up 383% compared with the same month last year followed by Paphos, where sales rose 229%. Meanwhile sales in Limassol, Larnaca and Nicosia rose by 80%, 78% and 47% respectively.

During the first four months of 2019, domestic sales rose by 37% compared with the same period last year.

However, some of these domestic sales may have resulted from properties acquired by banks as part of loan restructuring agreements, etc.

Domestic Property Sale Contracts – 2018/2019 Comparison

District Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Nicosia 2018 126 84 104 93 135 123 155 84 97 126 141 108
2019 127 164 115 137
Famagusta 2018 -3 18 18 12 34 27 18 29 21 36 14 29
2019 32 19 16 58
Larnaca 2018 60 44 67 41 55 61 41 47 60 46 82 52
2019 54 82 47 73
Limassol 2018 107 152 199 162 169 207 194 174 175 176 196 201
2019 166 152 192 291
Paphos 2018 18 8 43 21 43 55 62 48 32 24 64 60
2019 30 31 28 69
Totals 2018 308 306 431 329 436 473 470 382 385 408 497 450
2019 409 448 398 628

Overseas sales

Property sales to the overseas (non-Cypriot) market during April 2019 rose by 32% with 429 contracts of sale deposited compared with 326 in April 2018.

Although sales in Famagusta fell by 5%, they rose in the remaining four districts. Sales in Limassol rose 63%, sales in Larnaca rose 60%, sales in Nicosia rose 33% and sales in Paphos rose 14%

During the first four months of 2019, sales to the overseas rose by 9% compared with the same period last year.

Total Overseas Property Sale Contracts – 2018/2019 Comparison

District Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Nicosia 2018 20 12 22 24 18 23 21 7 21 19 20 23
2019 34 30 16 32
Famagusta 2018 51 34 22 40 45 34 43 21 24 21 33 17
2019 21 29 29 38
Larnaca 2018 52 55 49 42 58 72 71 47 61 70 61 51
2019 60 43 71 67
Limassol 2018 118 104 115 84 113 131 120 88 76 113 148 89
2019 85 104 95 137
Paphos 2018 146 155 129 136 158 125 171 108 120 180 166 170
2019 157 180 157 155
Totals 2018 387 360 337 326 392 385 426 271 302 403 428 350
2019 357 386 368 429

Sales to EU nationals

Property sales to EU nationals rose 31% in April compared with the same month last year.

With the exception of Paphos, where sales to EU nationals fell by 2%, they rose in all the other districts.

Sales in Larnaca rose 200%, while sales in Nicosia rose 90%. Meanwhile sales in Famagusta and Limassol rose by 42% and 24% respectively.

During the first four months of 2019 sales to EU nationals have risen 17% compared to the first quarter of 2018.

Foreign (EU) Property Sale Contracts – 2018/2019 Comparison

District Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Nicosia 2018 10 8 8 10 9 8 11 5 10 8 7 15
2019 14 14 9 19
Famagusta 2018 15 24 8 12 19 16 20 9 0 7 13 6
2019 9 6 14 17
Larnaca 2018 9 9 9 6 9 20 15 11 15 13 11 19
2019 12 12 21 18
Limassol 2018 15 17 32 17 19 22 25 24 11 27 38 20
2019 16 25 20 21
Paphos 2018 41 58 55 49 70 60 79 55 49 91 74 73
2019 56 72 61 48
Totals 2018 90 116 113 94 126 126 150 104 85 146 143 135
2019 107 129 125 123

Sales to non-EU nationals

Property sales to non-EU nationals rose 32% in April compared with the same month last year.

Although sales in Famagusta and Nicosia fell by 25% and 7% respectively, they rose in the remaining three districts. Sales in Limassol rose by 73%, sales in Larnaca rose 36% and sales in Paphos rose 23%.

During the first four months of 2019 sales to non-EU nationals have risen 6% compared to the same period last year.

Foreign (Non-EU) Property Sale Contracts – 2018/2019 Comparison

District Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Nicosia 2018 10 4 13 14 9 15 10 2 11 11 13 8
2019 20 17 7 13
Famagusta 2018 36 10 14 28 26 18 23 12 24 14 20 9
2019 12 23 15 21
Larnaca 2018 43 46 40 36 49 52 56 36 46 57 50 32
2019 48 31 50 49
Limassol 2018 103 87 83 67 94 109 95 64 65 87 110 69
2019 69 79 75 116
Paphos 2018 105 97 74 87 88 65 92 53 71 89 92 97
2019 101 108 96 107
Totals 2018 297 244 224 232 266 259 276 167 217 257 285 215
2019 250 257 243 306

Analysis of property sales since 2000

Cyprus Property Sale Contracts 2000 – 2019

Year Overseas Sales Domestic Sales Percentage
Overseas Sales
Total
Sales
2000 450 12,214 3.6% 12,664
2001 1,207 12,849 8.6% 14,056
2002 2,548 14,111 15.3% 16,659
2003 3,981 15,294 20.7% 19,275
2004 5,384 11,947 31.1% 17,331
2005 6,485 10,106 39.1% 16,591
2006 8,355 8,598 49.3% 16,953
2007 11,281 9,964 53.1% 21,245
2008 6,636 8,031 45.2% 14,667
2009 1,761 6,409 21.6% 8,170
2010 2,030 6,568 23.6% 8,598
2011 1,652 5,366 23.5% 7,018
2012 1,476 4,793 23.5% 6,269
2013 1,017 2,750 27.0% 3,767
2014 1,193 3,334 26.4% 4,527
2015 1,349 3,603 27.2% 4,952
2016
1,813 5,250 25.7% 7,063
2017
2,406 6,328 27.5% 8,734
20181 4,367 4,875 47.3% 9,242
2019 (Apr)
1,540 1,883 45.0% 3,423
Totals
66,931 154,273 30.3% 221,204

1 The Department of Lands & Surveys has advised that overseas sales in 2018 and subsequent year should not be compared to sales in previous years due to changes in the methodology used to classify ‘Aliens’ (foreigners).

Single family clings on in Armou

THE LONG fight for compensation for the owners of crumbling homes in Limnes, Pissouri may be better known but it’s all too familiar for the single family holding on in Armou, Paphos

It’s hard to believe that anyone could live in such a way in Cyprus.

Roads are impassable, as huge sections have fallen away creating a steep drop; deep gashes are apparent in the road surfaces and the land is literally torn apart in places.

Land slippage in Armou gathered momentum in recent rains, moving downhill by at least 10cm a day, according to the only remaining residents of the development.

There is an eerie silence in the street, which is home to six substantial detached homes complete with swimming pools. The properties were only built in 2004 and yet they lie empty and abandoned as they are unfit for human habitation.

The location is stunning, right in the middle of the Paphos countryside; gorgeous outdoor terraces with commanding views and well-stocked gardens make it easy to understand why this was the ideal spot to buy.

Now those gardens have fallen away; plants, trees and shrubs are growing at will; garden gates have been pulled off hinges and most of the pools lie cracked, broken and empty.

It is truly shocking.

This is a dream location for many, including the unsuspecting British buyers that chose to make this area their home.

But now weeds grow unattended along the street. Some of the houses are tilted. Walls have broken apart, steps collapsed, drains and piles of buildings exposed and huge chunks of terraces lie crumpled.

Looters have struck, stealing air conditioning units, windows, doors and anything else they can lay their hands on. They must have made their getaway on foot, as it’s impossible to get a vehicle anywhere near the development.

And yet this is still home for one British family who have been fighting the authorities for the last eight years.

This ‘luxury’ development was built by now defunct, JNM developers. Problems first arose in 2011 after heavy rains.

It has been a number of years since the Sunday Mail last visited the area, and it is shocking to witness the decline.

Simon Phillips, wife Jen and their two children are the only remaining residents of the development, trapped in a house which has had a ban order on it for the last eight years.

They have no choice, as all of their cash is tied up in the property. They bought it for 250,000 euros and moved to Cyprus with the idea of living mortgage free for the rest of their lives. They are unable to move due to financial restrictions and do not have available funds to rent another property.

The comparison with another crumbling complex of properties, the Limnes area of Pissouri, are obvious. There too homes have collapsed, the result of a continuous and accelerating landslip. Families have had to be evacuated.

Residents in Limnes are currently in a long battle for compensation, however, Phillips is seeking legal recourse with the government and is taking them to court.

“Taking the developer to court won’t result in any compensation, so I decided to take on the government. I will also request that the judge visits the site to see the situation for himself,” he told the Sunday Mail.

Phillips has a first hearing date scheduled for mid-May, but said he expects the case will be adjourned as the courts have so many cases backed up.

A number of the homeowners, who live mostly in the UK, have issued separate court proceedings against the developer. Phillips said one had won his case, but the developer, who is now no longer operating, has appealed.

Last month the auditor-general Odysseas Michaelides used the example of Armou as one of the reasons why the government should not compensate the Limnes property owners. He warned that if the Limnes owners won compensation, it would set a precedent for property owners in areas like Armou if the state essentially assumed the responsibility of the adequacy of the structural studies.

Phillips said that setting a precedent is actually the point.

“Something needs to be done. Action needs to be taken and put in place to ensure that permits are not given to build on land that is so obviously problematic,” he said.

“It’s like saying, ‘Oh we’re not going to punish any criminals because it will set a precedent.’ So in fact, they would be left to do it again.”

Heavy rains have doubled the problems with the Phillips house. It should never have been built as the area is not suitable for building, and it’s local knowledge that the hillside is historically known for land slips, said Phillips.

“The authorities gave a permit and changed the use from agricultural and this is negligent by the government.”.

The house next to Phillips is tilting at such an angle, it has moved down the hill by at least 12 metres. It is surprising it hasn’t totally collapsed and come crashing to the ground, he said.

Electricity wires were pulled off the side of his home recently, as the land movement caused an electricity pole to move. The EAC attended to make it safe, he said.

Water pipes now run overground as they were continually breaking underground.

The couple’s two children, both girls, now aged 17 and 19, have grown up in Cyprus and have only known a house that has brought stress, fear and pressure.

“I haven’t been able to give the girls the childhood I so wanted for them. All they have known of Cyprus is this house. They can’t invite friends around and it has adversely affected all of our lives in such a huge way,” he said.

Phillips said that the couple has had to ‘dig deep’ to ensure their relationship survives the trails of living in such a way and added that it has affected all of their health terribly, both mentally and physically.

It is practically impossible for the family to access their home now. They have to climb the broken steps and carefully step from one broken chunk of concrete and tiles to the next, much like stepping stones across a stream. Underneath, there is a huge hollow in the ground.

Around three metres of the concrete piles under the house are exposed, the septic tank also lies exposed, and the next-door garden walls have split apart with a huge 6 ft gap between. The land is moving so fast, shown by the marks the family made on one of the outdoor steps.

Since the start of the year, the four of them each has a bag full of essentials packed and left by the door, ready to make a hasty escape, if necessary.

Phillips said the family’s suffering must stop and the state needs to finally step up. He wants his original investment of 250,000 euros returned, as well as reasonable damages from the government. He is prepared to settle out of court if offered a suitable alternative property.

“We all need closure so badly after so long and to be given the chance to be able to live again. We started the court case in 2012, and seven years have gone by just to get a hearing,” he said.

Rush for Cypriot passports before rules tighten

FOREIGN nationals are reportedly scrambling to acquire Cypriot passports via the citizenship-by-investment scheme, ahead of tighter criteria kicking in on May 15.

According to daily Phileleftheros, the rush will likely result in prematurely reaching the ceiling of 700 naturalizations granted per year.

Citing the ‘Cyprus Real Estate Market Report‘ by KPMG, the paper said the uptick in applications was especially noted in the last quarter of 2018, when purchases of properties valued at €1m and above increased by 27 per cent compared to the last quarter of 2017.

Of the 730 transactions – worth €1m and over – occurring throughout 2018, more than a third were executed in the fourth quarter.

Although the new criteria for the scheme start applying on May 15, it is possible that a slight extension may be granted to certain applicants – for instance those who already possess a bill of sale for a property but have not managed to file all the required paperwork by that deadline.

In these cases, if an applicant submits the bill of sale prior to May 15, but not the other documentation, his or her application for naturalization could be assessed based on the existing, looser criteria.

Back in February – and following criticism about lack of transparency from quarters overseas – the government introduced changes to the citizenship-by-investment programme, tightening up requirements.

Among the changes are stricter criteria for applicants who will undergo background checks by a specialised foreign firm. Applicants will also be obliged to already possess a Schengen visa – a short-stay visa that allows a person to travel to any members of the Schengen Area for up to 90 days for tourism or business purposes.

Applicants who have already been rejected by other EU states will be excluded.

Also, the fees payable to the government will go up by €75,000, which will be diverted to research and development as well as to the land development organisation to fund affordable housing schemes.

In January, the European Commission warned that programmes of EU states, including Cyprus, to sell passports and visas to wealthy foreigners could help organised crime groups infiltrate the bloc and raise the risk of money laundering, corruption and tax evasion.

The warning was contained in the first report the EU executive produced over the multi-billion-dollar industry of so-called “investment migration,” which allows rich individuals to buy citizenship or residence in countries that put them on sale.

It highlighted shortfalls in the Cypriot and Maltese schemes which do not sufficiently check the origins of the wealth of individuals and do not allow their easy identification.

Although legal, these schemes are sometimes run in opaque ways and without sufficient checks on those who acquire passports and visas, the Commission said, mostly raising concerns about the programmes in Malta and Cyprus.

The investment amount is €2m if the investment is made solely in residential real estate, at least a quarter of which must be spent on a residence for life.

If not, the threshold is €2.5m, at least €500,000 of which must be spent on a permanent residence. In both cases, the requirement of a permanent residence ensures the investor remains closely engaged with Cyprus even if not actually obliged to live on the island.