Energy saving grant scheme

Cyprus energy saving grant schemeON MARCH 19th  2018 the Ministry of Energy opened the second call for proposals for the grant scheme “I Save I Upgrade” for existing homes belonging to individuals residing permanently in the Republic of Cyprus and with a Planning permit application before 21/12/2007.

The scheme which is part of the 2014-2020 Business Plan “Competitiveness and Sustainable Development”, is co-funded by the Cyprus Government and the EU and the amount available is €8 million. It aims  to  increase energy  savings,  it  covers the  purchase  and  installation  of  new  equipment  and materials and it concerns large scale energy upgrades with packaged measures that meet certain energy performance conditions (at least 50% energy savings and a new Energy Performance Certificate of minimum rating B). The available grant per case is 50% of the cost (75% for vulnerable groups) with a €15,000 limit (€10,000 for apartments). For proposals for an upgrade to a “near zero energy level” the grant could reach €25K for houses and €20K for apartment units. Vulnerable groups can also receive a maximum grant of €2,500 for individual upgrade measures.

After 2020 in Cyprus all new buildings will have to qualify as “near zero energy buildings”. “Near zero energy” is reference to a building with noticeably better living and working conditions, with a very high energy performance and net energy consumption near zero, i.e. the energy used annually by the building is equal to the renewable energy produced on site. At the moment the minimum required energy rating for new buildings in Cyprus is B.

The subsidised categories include the cost of the accredited expert, the insulation of the vertical and horizontal building components, the installation of new doors and windows, shading systems, solar hot water systems, solar/geothermal for cooling and heating, split a/c units, heat pumps, heating boiler replacement. The Ministry can set a maximum allowed subsidy amount for each selected category.

The application period opens on April 16th and it closes as soon as the funds run out. According to the official announcement the potential applicants before they file an application are required to choose an accredited/qualified expert who will carry out the required analysis. The grant is given to the home owner after the works are completed and approved by the Ministry’s officials.

The application period for the first €8 million of the scheme which ended nearly two years ago was relatively short and based on the market demand which still remains high, the amount turned out to insufficient.

Investing in high energy performance and renewable energy is investing in a greener tomorrow and in a higher quality of life. EU and national energy efficiency target levels can only be achieved with more similar schemes and other financial incentives.

About the author

Xenios Chr. Sofianos
Consultant Engineer
SKYY Consulting Limited

Member of the Cyprus Scientific and Technical Chamber (E.T.E.K.)
Accredited Expert for Building EPC’s (Energy Performance Certificates for residential and commercial properties – energy performance assessor).
Member of the Cyprus Association of Civil Engineers.
Evaluator of the Grant Scheme for the Encouragement of Business Innovation.

Sea caves destruction blocked

Sea Caves at Peyia CyprusTHE DESECRATION of stunning and environmentally sensitive sea caves area in the municipality of Peyia in Paphos on the west coast of Cyprus has been going on for years by the construction of so-called ‘luxury homes’ and other developments by those who seem intent on destroying the area in their never-ending quest for profit.

The sea caves area is the birthing habitat of the Mediterranean Monk Seal, which is listed as the most “critically endangered” marine mammal species in the Mediterranean by the International Union for the Conservation of Nature; there are only 700 Mediterranean Monk Seal left in the world.

However the latest desecration of the area , the construction of a five-star hotel, residences and villas with swimming pools by Korantina Homes Ltd, has been stopped (at least for the time being) by Agriculture Minister Costas Kadis who has blocked the Building Permit. This move, according to Stockwatch, followed an objection by the Auditor General, Odysseas Michaelides.

Meanwhile the Cyprus Scientific and Technical Chamber (ETEK) has warned that Cyprus had reached a crossroads where it should take the right and difficult road to accept mistakes and take drastic measures to restore the environmental damage by withdrawing wrongly given permits.

ETEK also warned that pressures for growth in the remaining environmentally sensitive areas in the Republic will intensify. If Cyprus allows the self-destructive process to profit a few at the expense of many to continue it will lose the few remaining environmental diamonds and lose an important competitive advantage of the island’s tourist product.

Call to reduce non-performing loans

Non-performing loansFOLLOWING the Troika’s mission to Cyprus to carry out a post-programme surveillance (PPS) mission following the country’s successful conclusion of its economic adjustment programme, the International Monetary Fund issued the following statement yesterday calling on Cyprus to improve payment discipline and reduce non-performing loans (NPLs):

Since our last visit, Cyprus’s economic growth has continued to accelerate, supported by construction, tourism and professional services. Unemployment has moderated further. The fiscal position has improved markedly and public debt has declined below 100 percent of GDP. Taking advantage of the declining cost of market-based financing, Cyprus made an early repurchase to the IMF in July 2017. However, despite a sizable and sustained improvement in macroeconomic conditions, private sector indebtedness remains extremely high and continued weak payment discipline has kept non-performing loans (NPLs) at very high levels. The need for additional provisions and limited opportunities for new lending continue to weigh on banks’ profitability.

The current rapid pace of economic expansion is forecast to continue. GDP is projected to grow by 4–4¼ percent during 2018–19, underpinned by a pipeline of mainly foreign-funded, large construction projects, notwithstanding somewhat slower growth in private consumption due to better compliance by households with regard to their contractual debt obligations. Over the medium term, growth is projected to ease to 2½ percent as construction projects are gradually completed. The high import content of domestic demand, especially for construction materials, is projected to keep the current account deficit around 6–7 percent of GDP. Tax revenue will benefit from the escalation in activity. Under this baseline scenario, capacity to repay the Fund is seen as adequate, with repayments funded by large fiscal primary surpluses and by newly issued market-based debt securities on relatively favourable terms. However, repayment capacity could be weakened if significant contingent liabilities from banks’ distressed assets materialize, an excess supply of luxury properties were to generate a new boom-bust cycle, or fiscal discipline were eroded by yielding to spending pressures.

Strengthening payment discipline, avoiding pro-cyclical policies and adopting macro-critical structural reforms would help preserve financial stability, protect the downward trajectory of public debt, and support balanced and durable growth. Doing so would also safeguard capacity to repay:

1. Improving payment discipline and reducing NPLs. A decisive and durable reduction in NPLs requires strengthening Cyprus’s payment culture. Amending the legal frameworks for insolvency and foreclosure can support this goal by incentivizing borrowers to engage with banks to reach mutually-agreeable restructuring solutions based on commercial terms. Limited, well-targeted fiscal support to lower-income distressed borrowers can strengthen their financial viability and promote payment compliance throughout the duration of the loan. Reliance on third-party loan servicing companies should continue and be made fully operational, and any NPLs transferred to nonbank entities should not be merely warehoused. The recently-announced search for strategic investors in the Cyprus Cooperative Bank is a welcome development and should proceed in a smooth manner.

2. Guarding against procyclical policies. Recent fiscal performance has benefited from the cyclical upswing and incentives supporting the construction sector. To avoid spending cyclical or transitory revenue and to create space to absorb possible contingent fiscal shocks, annual ceilings on nominal spending should increase in line with medium-term output growth, with downward adjustment to compensate for any future cuts in tax rates or narrowing of tax bases. Incentives supporting the construction sector should be withdrawn. A durable mechanism for keeping the public-sector wage bill in check should be instituted. A system for close monitoring of the fiscal costs of the new National Health Service should be adopted and well-designed spending safeguards should be introduced.

3. Restarting targeted structural reforms. The effectiveness of commercial claims enforcement and the efficiency of the courts should be strengthened to improve the payment culture and investment environment. Plans for expedited investment procedures while also phasing out incentives for construction could attract capital into innovative sectors and help diversify the sources of GDP growth. Corporate governance and operational efficiency should be strengthened in key semi-governmental and private entities to modernize the economy and make it more flexible.

We thank the Cypriot authorities, our European partners and our private sector interlocutors for informative discussions and their cooperation and generous hospitality.

Further reading

Cyprus: Staff Concluding Statement of the Second Post-Program Monitoring Mission

High-end Cyprus property sales boom

High-end Cyprus property sales boomTWO HUNDRED AND SIXTY Cyprus properties were sold for more that €1.5 million during 2017 according to a report by PwC Cyprus – Cyprus Real Estate Market Year in Review | 2017.

PwC notes that The Cyprus economy relies heavily on the real estate sector, as Cyprus has one of the highest home ownership rates in Europe and there is a significant overseas market for holiday and second homes.

From 2014 onwards, there were signs of improved confidence in the Cyprus economy and the real estate market, leading to increased transaction activity in the market. A further significant increase was recorded in 2016 (Year-on-year increase of 43%) with a subsequent increase of 24% during 2017. The total number of contracts filed at the Department of Lands & Surveys  during 2017 reached an eight-year high of 8,734 (2016: 7,063).

During 2017, the highest volume of properties for which sale contracts were filed by foreign buyers, was recorded in Paphos (36%), followed by Limassol (34%) and Larnaca (16%).

The vast majority of sales to foreigners relate to residential properties. During the past few years, such sales have been increasing predominantly as a result of the revisions to the scheme for naturalisation of investors in Cyprus by exception.

Double-digit growth rates in foreign transactions were exhibited across all districts of Cyprus in 2017. The highest annual growth was recorded in Famagusta (61%), followed by Paphos (38%) and Limassol (33%).

Demand for hi-end residential Cyprus property

PwC reports that during the period 2010-2013, the volume of sales of high-end residential property (? €1.5 million) across Cyprus was stable, averaging around 41 units per annum.

From 2014 onwards and following revisions to the scheme for naturalisation of investors in Cyprus, demand for this type of properties has been increasing continuously.

During 2017, the total number of high-end residential transactions reached 260, which corresponds to an annual increase of 45% (2016: 179).

Hi-end sales distribution

Limassol continues to be the preferred location for high-end residential properties (approximately 52% of total transactions of 2017), followed by Paphos (36%) and Famagusta (9%).

Nicosia and Larnaca represent the least active districts, with total transactions among the two districts representing 3% of total (8 transactions).

As per Land Registry data, during 2017, 66% of high-end residential property transactions in Limassol related to apartments with the remainder 34% relating to villas. As regards Paphos, almost entirely high-end residential transactions recorded in 2017 related to villas.

The majority of transactions in the high-end residential segment across Cyprus is within the €1.5 -€2 million price band.

Demand for Cyprus properties in excess of €2 million continued to rise, largely as the result of the launch of new high-end residential developments in the market increasing the supply of units of this price range.

Further reading

Cyprus Real Estate Market Year in Review | 2017

Peyia sea caves media reports

peyia sea caves protestA NUMBER of reports concerning the on-going desecration of the sea caves area of Peyia have been published in the local media over the past week:

On Thursday, the Greek-language Phileleftheros published an announcement Here are the government measures for the Sea Caves:

With the aim of integrating the protection of sea caves, an important habitat in our country, the Ministers of Agriculture, Rural Development, the Environment and the Interior held a meeting in the presence of the Directors of all the departments involved in the two Ministries. Ministers understand the concerns expressed by civil society on the issue and believe that with the cooperation of local society, organized clusters, local authorities and government services, it is possible to achieve rational management of the area and preservation of the significant biodiversity it hosts.

At the meeting, the following measures were decided:

  1. Within three months an Environmental Impact Assessment study will be carried out in the context of species and habitats protection.

Depending on the findings of the study, it will be considered, where appropriate, to extend the existing beach protection zone to minimize the impact of human activity on the sensitive habitats of the area while ensuring the safety of any structures and bystanders. The study will propose specific measures and, according to its findings, will further specify the measures outlined below.

  1. Changing existing environmental legislation to fill gaps that have been observed with regard to the procedures used to define urban areas. In particular, an amendment to Article 6 (2) of the Environmental Impact Assessment by certain plans and / or programs of 2005 will be promoted so that the requirement for a strategic environmental impact assessment study covers beyond the development and revision of the Development Plans and the case of modifying and finalizing these Plans.
  2. Removal of all illegal constructions and restoration of illegal interventions in the area.
  3. Ensure the conservation of important elements of biodiversity in the region through measures including:

Prohibition of fishing, crossing of boats and other navigable resources in the proximity of the sea caves area. The Minister of Agriculture, Rural Development and the Environment will issue a relevant decree on the basis of Article 5A of the Fisheries Law and at the same time promote the amendment of the Fisheries Regulations to include the management measures in the provisions of the Regulations.

Prohibition of the construction of a coastal pedestrian street and landscaping within the Beach Protection Zone.

Mapping the coastal area of ??seascapes and assessing the extent of erosion, as well as signs that pose risks for visitors.

The Geological Survey Department will conduct a geotechnical assessment of the seashore cave area and determine the areas with unstable and steep slopes that are at risk of precipitation. The Department of Forests of the Ministry of Agriculture, Rural Development and the Environment, in cooperation with the Municipality of Pegeia, will proceed with the installation of a fence or other means for the protection of the cave ecosystem as well as for the safety of the visitors.

Changing road lighting so as not to alter natural light and/or luminescence levels and to fully comply with the protection requirements for Natura 2000 site characterization species.

The imposition of restrictive conditions in the context of the issue of planning permissions according to which owners are prohibited from altering the natural light and/or luminescence levels by means of direct and/or indirect sources of light pollution according to the findings of the Environmental Notice. *

Prohibition of events that may cause noise / light pollution in consultation with local authorities.

Layout of the green areas of the sea-side developments along the coastal protection zone to create a larger zone that should be allowed to evolve naturally under the terms of planning permission. *

Not allowing owners to buy the green space in their urban development application.

Removal of foreign/invasive species from green areas, as there is a serious risk of their escape and extension to natural habitats within the Natura 2000 area. In their place, local flora species may be used according to a list prepared by the Department of Forests and the Environment Department.

Maintenance and/or rehabilitation by the Department of Forests of terrestrial natural habitats in the State Party within the Protected Area of ??the Beach that has been downgraded and the prohibition of any other construction or activities in that Zone.

A ban on the use of any insecticides or fertilizers in both the gardens of existing villas and public green areas.

Prohibition of non-governmental projects to shield the coastal slope or to remove rocks from the sea or the beach.

Determination of the access of trucks and other heavy goods vehicles from all deployments under construction, taking into account the sensitivity of the affected areas, where appropriate. *

In the framework of the preparation of the Pegeia Local Plan, a Strategic Environmental Impact Study will be carried out and an appropriate Impact Assessment will be carried out in the Natura 2000 area, where an environmental assessment will be made of the current situation and suggestions for changes in urban areas and policies.

Consultation of Urban Planners with the Environment Department to examine all future developments regardless of size. Formulation, coordinated by the Environment Department, a mechanism for feedback and consultation with all the relevant Departments of the Ministry of Agriculture, Rural Development and the Environment, in order to form a comprehensive, documented and universally accepted position.

Monitoring on a systematic basis the implementation of the above measures.

* Measures already taken

Also on Thursday the Cyprus Mail published a report ‘No turning back time for sea caves’ minister says:

The clock cannot be turned back on controversial developments at the sea caves area in Peyia, Paphos, and authorities can only limit the damage by rectifying some illegalities and take steps to avoid them in the future, Agriculture Minister Costas Kadis said on Thursday.

The measures will not greatly affect two major developments in the area, a number of villas constructed by Leptos, and a huge project by Korantina Homes further west, which involves a luxury hotel and some 40 villas.

The meeting heard that some eight irregularities will have to be restored at the Korantina project, including kiosks, a lifeguard tower, and rock work. The ministers were assured that the projects are not expected to have irreversible effects on the area’s environment.

Minister Kadis told the Cyprus Mail that he was determined to apply Thursday’s decisions to prevent this from happening again.

“I am determined to do whatever necessary to avoid similar issues in the future and ensure what has been done won’t do any further damage,” he told the Cyprus Mail. “Unfortunately, no one can turn back time.”

The area where the Leptos development is being constructed had been rezoned in 2008 nine days before the presidential elections by then interior minister Christos Patsalides.

Patsalides defended his action arguing that he had simply accepted the recommendations of experts, which had been prepared following consultations with local officials, the district administration and the union of communities.

No one had objected after the publication of the decision, he said.

The former minister in the Tassos Papadopoulos administration questioned why building permits were granted 10 years later if the decision at the time had been wrong.

That process was now under investigation by the auditor-general.

On Friday the Cyprus Mail published a report that the Green Party had appealed to European Commission over the sea caves developments:

The Green Party on Friday called on the EU to examine whether the government’s decisions surrounding the controversial developments in the sea caves area in Peyia, Paphos were legal.

In a letter submitted to the European Commission’s representation in Cyprus, party leader Giorgos Perdikis said he was reporting the government and called on the EU environment commissioner to examine the case.

“We ask of the EU environment commissioner to examine the government’s decisions on the basis of their legality in relation to the European institutional framework on protecting nature,” the letter said.

The sea caves are the birthing spot of the Mediterranean Monk Seal (Monachus monachus), which is listed as the most ‘critically endangered’ marine mammal species in the Mediterranean by the International Union for the Conservation of Nature (IUCN).

Deputy chief of the EU commission’s representation in Cyprus Thea Pieridou said the report would be sent to the relevant department in Brussels.

Cyprus Property Transfer Fees and VAT

Cyprus Property Transfer Fees and VATLAWMAKERS in Cyprus plan to draft a bill aiming to eliminate a distortion where certain buyers of real estate must pay Property Transfer Fees while others do not.

When a person buys a new property and pays VAT on it, he or she is not subject to Property Transfer Fees, whereas transfer fees do apply when the transaction involves a land lease.

“The proposal is to strike [from the current law] the obligation that once a lease is registered, and for which VAT has been paid, for the person not to pay transfer fees,” Disy MP Marios Mavridis said.

This distortion in the market is adversely impacting competition, he added.

In a related issue, the government intends to bring an amendment to the law recently passed imposing 19 per cent VAT on building land.

Currently, when someone buys a finished housing unit or apartment as their primary dwelling they pay 5 per cent VAT, whereas buying a plot of land for owner-occupied housing incurs a 19 per cent VAT charge.

Main opposition Akel said the law as it stands is dysfunctional and rife with ambiguities, leading to confusion in the real estate market.

Diko MP Angelos Votsis said the government will be submitting a bill exempting from payment of 19 per cent VAT young couples who buy land for the purpose of building a primary residence.

Also on Monday, the House finance committee discussed a bill submitted by the government designed to attract foreign investment.

The bill will introduce changes to income tax legislation, so that investments in a mutual fund or a partnership incorporated under the law governing Open-Ended Collective Investments or the law on Alternative Funds are no longer considered as a permanent establishment in the Republic.

Once these investments are not considered a permanent establishment in Cyprus, earnings arising from such investments would be taxed in the tax residency country.

By the term “alternative funds” are designated all investment funds that are not already covered by the European Directive on Undertakings for collective investment in transferable securities. This includes hedge funds, funds of hedge funds, venture capital and private equity funds and real estate funds.

Open-ended funds are collective investment schemes that can issue and redeem shares at any time.