Cyprus moves to strengthen oversight of foreign investments

Nigel Howarth
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Cyprus moves to strengthen oversight of foreign investments

The House Finance Committee has wrapped up its examination of foreign direct investments (FDI) screening bill, paving the way for its discussion in the plenary session within the next three weeks

The legislation received broad cross-party backing, reflecting a shared commitment to safeguarding Cyprus’ economic openness while addressing national security concerns.

Committee chairwoman and Democratic Party (DIKO) MP Christiana Erotokritou said the bill was submitted on 10 July, examined from early September, and completed its committee stage on Monday. She described the legislation as a “modern framework” that combines investment attraction with enhanced security oversight.

“The Cypriot economy remains outward-looking and committed to attracting foreign investments, but with rules in place to protect the public interest and the country’s security,” Erotokritou said following the session.

Who and what does the legislation target?

The proposed framework sets out that investors from outside the European Union (third-country nationals) wishing to invest in strategic sectors such as energy, defence, health, telecommunications, and real estate will be subject to screening procedures. The aim is to protect Cyprus’ public interest and national security from potential risks linked to foreign control of critical infrastructure.

Despite some initial differences during committee discussions, MPs reached a consensus across party lines.

“With this convergence of views, the bill proceeds to the plenary with the best omens, strengthening Cyprus’ profile as an attractive investment destination, but with transparency and security,” Erotokritou added.

Alignment with EU investments screening framework

The bill brings Cyprus in line with European Union requirements for member states to implement mechanisms for monitoring foreign direct investments. The EU’s investment screening framework, introduced in 2019, enables member states to assess transactions that could affect public order or security, particularly in sensitive sectors.

As an established international business centre and financial hub, Cyprus has long attracted substantial foreign investment across multiple industries. Under the new system, investments from non-EU countries will be reviewed to determine whether they pose potential risks before being approved.

Cyprus joins other EU member states in adopting a national screening mechanism, allowing authorities to share information with the European Commission and other countries when cross-border implications arise.

The new legislation is seen as a step towards balancing openness to international investment with the need to safeguard critical assets – a balance increasingly prioritised across the EU in recent years.

(The Ministry clarified that FDIs in land and real estate are covered by the legislation only when the land and property concerned are of key importance for the use of critical infrastructure, for example: in the fields of energy, defence, water supply, communications, and others – as set out in the Annex to the Bill.)

Communal fees: The crisis in Cyprus’ jointly-owned buildings

Nigel Howarth
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Communal fees: The crisis in Cyprus’ jointly-owned buildings

It’s been more than two years since a bill was drafted, designed to resolve longstanding issues and challenges in the management of jointly-owned buildings, and published for public consultation.

The bill, which has transformed into three bills has received numerous calls for amendments from interested parties including the Cyprus Association of Jointly-Owned Managers (SYDIKOIK), the Association of Cyprus Banks (ACB) and the Cyprus Real Estate Registration Council.

Yet none of these interested parties has fully addressed the most critical issue – communal fee payments.

Jointly-owned buildings in crisis

From the correspondence I receive, the most persistent and damaging challenge faced by Management Committees of jointly-owned buildings is the outright refusal of certain owners to pay their communal fees.

This behaviour directly jeopardizes the insurance, maintenance, and proper operation of buildings, while unfairly transferring the financial burden onto responsible owners who fulfil their obligations.

Management Committees must have immediate and reliable access to funds to perform their core duties — including insuring the building and carrying out essential repairs & maintenance works. Without an enforceable system for prompt payment, Management Committees are effectively set up to fail.

The problem is further aggravated by the widespread absence of Title Deeds for thousands of properties, which makes it impossible to lodge memos or pursue standard enforcement measures.

In many cases, the only option left to Management Committees remains the courts, a route so costly and slow that it offers no solution to the immediate need for communal fees.

In cases where banks have repossessed units within jointly-owned buildings, those banks must assume responsibility for the payment of all communal fees associated with repossessed units. The same obligation must also apply to credit acquiring companies  (vulture funds) or asset management entities that have acquired distressed loan portfolios from banks. Failure to enforce this responsibility creates serious inequities and further deprives Management Committees of the funds necessary for building upkeep and safety.

In certain cases, the property owner may have passed away. In such circumstances, the executor or administrator of the deceased’s estate must settle any outstanding communal fees, which are then deducted from the estate before distribution to the beneficiaries.

If legislative reform is to be meaningful, it must equip Management Committees with robust and practical enforcement powers that ensure the timely collection of communal fees. Anything less will merely paper over the cracks, addressing the symptoms without resolving the underlying cause. Stronger provisions — such as administrative enforcement mechanisms, financial sanctions, or expedited recovery procedures — are essential to safeguard the long-term sustainability and integrity of jointly-owned buildings.

That said, there will inevitably be cases where owners are genuinely unable to pay due to severe financial hardship arising from illness or loss of income. Such cases must be handled with compassion, and flexible repayment arrangements should be arranged through mediation services to ensure fairness without undermining the collective interest.

Further concerns raised over draft jointly-owned buildings bills

Nigel Howarth
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Further concerns raised over draft jointly-owned buildings bills

The Cyprus Real Estate Registration Council has raised strong concerns and outright opposition to key provisions in the draft jointly-owned buildings bills currently under discussion in Parliament.

According to the Council, these provisions risk creating a bureaucratic deadlock in the property market and placing an unbearable burden on already understaffed building authorities.

While acknowledging the need for better management of jointly-owned buildings, the Council warns that certain clauses could have disastrous consequences.

Proof of jointly-owned buildings communal fee payments

A central issue of contention is the proposed requirement for a certificate from a jointly-owned buildings management committee confirming payment of communal fees, for both the filing of a sales contract and the transfer of property to its buyer.

Council President Marinos Kineyirou explained: “Such a demand would block thousands of transactions, cause endless delays and open the door to potential blackmail of owners by arbitrary or mismanaged committees.

“Our economy and investment attractiveness rely on the speed and security of transactions. Instead of solving one issue, we risk creating a far greater one, undermining the credibility of Cyprus as an investment destination.”

The Council also notes that management committees of jointly-owned buildings already possess the legal means to pursue unpaid communal fees through the courts, without resorting to procedures that hold owners hostage.

Building authorities overwhelmed

Equally problematic, in the Council’s view, is the proposal to assign registration and supervision of management committees to building authorities.

“It is common knowledge that building authorities are already overwhelmed by workload and understaffing, leading to major delays in issuing permits. Tasking them with overseeing thousands of committees across Cyprus is a recipe for failure. It would paralyse both the construction sector and the functioning of the committees themselves,” added Mr Kineyirou.

Call for rethink

In a memorandum submitted to the Parliamentary Committee on Internal Affairs, the Real Estate Registration Council urged MPs to reconsider the contested provisions.

At the same time, the Council expressed its readiness to contribute to constructive dialogue to find solutions that are practical, fair, and effective – without undermining the Cyprus property market or economic growth.

Cyprus house price index Q2 2025: Growth slows to 1.0% annually

Nigel Howarth
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0
Cyprus house price index Q2 2025: Growth slows to 1.0% annually

The Cyprus Statistical Service announced today preliminary figures for the House Price Index (HPI) for the second quarter of 2025.

The index stood at 113.99 points (base year 2015=100), recording a small quarterly increase of 0.2% compared with the first quarter of the year.

On an annual basis, the index registered an increase of 1.0% compared with the second quarter of 2024.

HPI trend

The evolution of the House Price Index over the past twelve-months shows a gradual slowdown in annual changes; from the second quarter of 2024 through to the first quarter of 2025, annual increases ranged between 2.0% and 2.7%.

However, in the second quarter of 2025, the annual change was limited to 1.0%.

On a quarterly basis, the changes were: +1.2% in the second quarter of 2024, +0.7% in the third quarter, -1.0% in the fourth quarter, +1.1% in the first quarter of 2025, and +0.2% in the second quarter of 2025.

House price index methodology

According to the CYSTAT, the Cyprus House Price Index (HPI) “is a quarterly index which measures the change in the average prices of residential dwellings. It captures all types of residential properties, both new and existing. The land component of the residential property is included.

“The data source used for both, indices and weights, is the Department of Lands and Surveys, Ministry of Interior. The data cover all areas which are under the control of the government of the Republic of Cyprus.

“Data are marked as provisional and are revised as soon as new information is available.”

In its press release, CYSTAT advised that “the data are stratified into two strata; old and new dwellings. For each stratum a rolling window hedonic regression model is used in order to calculate the sub-indices. Then, the sub-indices are weighted based on the sum of the value of the properties of each stratum in the previous year.”

Year Quarter House Price Index
(2015=100)		 Quarterly Change
(Compared to the
previous quarter) (%)		 Annual Change
(Compared to the same quarter
of the previous year) (%)
2010 Q1 114.37 -1.6 -6.6
Q2 112.79 -1.4 -6.9
Q3 112.39 -0.4 -5.7
Q4 112.05 -0.3 -3.6
2011 Q1 111.56 -0.4 -2.5
Q2 113.99 2.2 1.1
Q3 111.22 -2.4 -1.0
Q4 107.60 -3.2 -4.0
2012 Q1 106.40 -1.1 -4.6
Q2 106.02 -0.4 -7.0
Q3 110.14 3.9 -1.0
Q4 108.22 -1.7 0.6
2013 Q1 104.54 -3.4 -1.7
Q2 104.77 0.2 -1.2
Q3 103.05 -4.7 -9.3
Q4 100.78 0.9 -6.9
2014 Q1 98.08 -2.7 -6.2
Q2 103.55 5.6 -1.2
Q3 102.70 -0.8 2.8
Q4 101.56 -1.1 0.8
2015 Q1 97.52b
Q2 100.59 3.1
Q3 102.49 1.9
Q4 99.40 -3.0
2016 Q1 97.29 -2.1 -0.2
Q2 99.18 1.9 -1.4
Q3 101.87 2.7 -0.6
Q4 102.72 0.8 3.3
2017 Q1 99.64 -3.0 2.4
Q2 102.74 3.1 3.6
Q3 102.46 -0.3 0.6
Q4 105.24 2.7 2.4
2018 Q1 103.10 -2.0 3.5
Q2 104.01 0.9 1.2
Q3 103.12 -0.9 0.6
Q4 107.04 3.8 1.7
2019 Q1 107.93 0.8 4.7
Q2 112.73 4.5 8.4
Q3 105.64 -6.3 2.4
Q4 106.51 0.8 -0.5
2020 Q1 109.13 2.5 1.1
Q2 109.48 0.3 -2.9
Q3 104.21 -4.8 -1.3
Q4 109.10 4.7 2.4
2021 Q1 102.82 -5.8 -5.8
Q2 104.07 1.2 -4.9
Q3 106.55 2.4 2.2
Q4 103.28 -3.1 -5.3
2022 Q1 103.95 0.5 1.1
Q2 106.35 2.3 2.0
Q3 109.95 3.4 2.9
Q4 108.27 -1.5 4.7
2023 Q1 110.31 1.9 6.1
Q2 110.15 -0.1 3.6
Q3 110.65 0.4 0.6
Q4 109.95 -0.6 1.6
2024 Q1 111.53 1.4 1.1
Q2 112.86 1.2 2.5
Q3 113.62 0.7 2.7
Q4 112.47 -1.0 2.3
2025 Q1 113.71 1.1 2.0
Q2 113.99 0.2 1.0

b There is a break in the series in the first quarter of 2015 due to redefinition of the model variables.

Cyprus developers urge property investments exempt from FDI law

Nigel Howarth
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0
Cyprus developers urge property investments exempt from FDI law

The Cyprus Property Developers Association (CPDA) has called for real estate investments to be exempt from the provisions of the draft law establishing the National Mechanism for Screening Foreign Direct Investments (FDI), when these investments are made for residential, holiday home, or investment purposes.

In a letter to the Parliamentary Committee on Finance, CPDA President, Yiannis Misirlis, emphasised the need for a specific exemption to ensure that the framework remains open and attractive for property investment.

Support for the FDI screening mechanism

Mr Misirlis underlined that the Association’s Board of Directors supports the establishment of the National FDI Screening Mechanism, noting that it makes a significant step in aligning Cyprus with the European framework while strengthening the country’s credibility as a modern and secure investment destination.

He added that adopting clear and transparent procedures is essential for building investor trust and attracting high-quality investments that deliver multiple benefits to the Cypriot economy and society. However, he stressed that the mechanism should be implemented in a way that safeguards transparency and credibility without undermining investment momentum.

To this end, the CPDA proposes an exemption for property transactions aimed at housing, holiday homes, or investment, ensuring that the framework remains accessible and appealing to real estate investors.

Concerns from credit acquiring companies

Lisa Solonos, Director of the Association of Credit Acquiring Companies and Credit Facility Management Companies (SEDC), also expressed concerns over the draft legislation.

She warned that, as currently drafted, the law could create significant uncertainty and delays in both investment and property-related transactions. For reasons of legal clarity and practicality, she stressed the need for a precise and unambiguous definition of the properties covered by the legislation.

Ambiguity in definitions and timelines, she cautioned, would likely lead to an excessive number of applications, delays, investor frustration, and potentially deter investment in Cyprus, driving interest towards neighbouring destinations.

What’s next for the draft FDI law?

The article-by-article discussion of the draft law on FDI screening, covering investments exceeding €2 million, is set to continue next Monday, with the bill expected to reach the House Plenary for a vote later in October.

The legislation was first introduced in mid-2022, during an attempted takeover of the Bank of Cyprus by a major US investment group. The revised draft before the Finance Committee provides for the establishment of an FDI Screening Mechanism in line with EU Regulation (EU) 2019/452.

The bill includes the creation of a review team for foreign investments, particularly in critical infrastructure, with oversight led by the Ministry of Finance and involving relevant ministries depending on the sector.

It also provides for retroactive application of up to 15 months, allowing authorities to annul investments where funds originate from questionable sources. Notably, ships are exempt from the provisions due to the special regime of Cyprus’ shipping industry, though floating LNG units remain covered.

The proposed framework also regulates cases of mandatory notification and approval, criteria for screening, the review process, required information, and the powers of the competent authority, namely the Ministry of Finance.

Banks push for legal reforms on jointly-owned buildings expenses

Nigel Howarth
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0
Banks push for legal reforms on jointly-owned buildings expenses

The Cyprus Banks Association (CBA) has put forward a series of recommendations regarding the management of jointly-owned buildings, as part of the ongoing discussion of the relevant bill before the House Interior Committee.

The CBA has suggested enabling the registration of a memorandum of encumbrance (MEMO) without requiring a court ruling, as well as the introduction of clear rules on the imposition of interest on property owners who fail to pay common expenses for extended periods. At the same time, the association has requested a transitional period for the full implementation of the legislation.

A more efficient legal framework

In a position paper submitted to the Committee, the CBA underlined the need for a comprehensive and effective legal framework to govern the management of jointly-owned buildings. The aim is to tackle long-standing challenges in the collection of unpaid communal fees, which are currently hampered by lengthy court procedures.

One example proposed is that once the competent authority (EOA) determines the amount owed, a memorandum of encumbrance could be registered directly against the property, without the delay of judicial proceedings.

Interest on arrears not of fines

The CBA also recommends that management committees (MCs) be allowed to impose interest on overdue communal expenses prior to litigation. This, it argues, would be a fairer and more effective tool than fines to ensure timely payments.

Currently, the draft bill does not regulate interest rates, and in some cases, owners have faced charges as high as 12%. The association proposes a maximum interest rate of 2%, aligned with the Law on the Liberalisation of Interest Rates, while abolishing the right to impose fines.

If fines remain permitted, the CBA insists that both interest and fines should be capped and clearly defined in the law to avoid disputes between owners and management committees.

Ensuring existence of management committees

Another key proposal concerns the guarantee of a functioning management committee in every shared building. Since such committees are vital for maintenance, repairs, and even property transfers, the CBA suggests granting EOAs the power to appoint external committees if owners show no interest in managing the property.

This safeguard would also prevent complications in cases where a management committee is required to issue a clearance certificate for unpaid communal expenses, which is essential for property sales and loan restructuring.

Need for transitional period

Finally, the CBA stresses the importance of a transitional provision to allow sufficient time for the proper establishment and registration of management committees across all jointly-owned buildings before the law takes effect.

The parliamentary debate on the bill continues, alongside consideration of a separate proposal on dangerous buildings. Representatives from multiple ministries, the Land Registry, municipalities, professional associations, and the banking sector have been invited to contribute to the discussions.

To read an English translation of the recommendations proposed by the Cyprus Banks Association – click here.

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