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Did the return of subsidized housing loans “isken” affect the Lebanese Real Estate market?

Published March 1, 2019

Early 2018, a major change has impacted the real estate market in Lebanon: the stop of subsidized housing loans – otherwise known as “isken” loans. Lebanese First Home buyers specifically were dependent to a very large extent on a subsidized housing loan in Lebanese Pounds (LBP) whenever buying an apartment or home. New couples and younger generation with limited income in general were hugely affected by the fact that those loans stopped abruptly in early 2018. Those buyers were no longer able to buy a new home in the absence of “isken loan” and developers were facing a big stock of their apartments that is now unsold as their target buyers had no more access to cheap loans (or any loans for that matter as banks became reluctant to give any housing loan alternatives). The normal mechanism of selling an apartment under-construction to an end-user followed the below usual scheme:

1-      End-user would enter an agreement with developer whereby the former buys by paying an upfront payment and monthly payments to developer until delivery of apartment. This would account for roughly 20 to 25% of the apartment price

2-      End-user would secure an “isken” loan which covers the remaining amount to the developer and the deed would be transferred to the name of the buyer – with a mortgage to the bank

The above scheme applies as well to finished apartments assuming the buyer has the full upfront payment covering 20% to 25% in one go. This was even applied to non-resident Lebanese or expat Lebanese which constituted a reasonable percentage of buyers. Expats are favored by financial institutions & banks as well as sellers and developers due to their normally higher salaries than the Lebanese residents.

The real estate market slowed down in the past year given the above usual scheme was no longer possible following the stop of isken and BDL subsidized loans. Hence, the announcement earlier last month that those loans are returning gave huge hope to both buyers and sellers that the situation may be fixed soon. “While we hoped that this news will have a much-awaited positive impact on the real estate market, we did not feel any real rise in transactions following the decision.” said Samar Issa – senior Real Estate Agent in JSK covering Jbeil area. “The loans came at much higher interest rate than previously and we are still unsure as to the people eligible for the subsidized loans. It seems the loans have applied mostly to those few people that have previously applied for the subsidized loan and were left hanging in the middle of the process when isken stopped suddenly back in February 2018”.

While markets such as Jbeil which heavily relies on “isken” loans for the mass purchases of residences did not witness any major jump in transactions following “isken” loan announcement last month, the rental market remains strong. People with limited income are opting to rent in the absence of any real solutions allowing them to purchase their dream apartment. “The Lebanese client still prefers to buy whenever possible vs. renting- however this is not possible at the moment in the absence of an isken loan with low interest rates accessible to the mass population” – explains Samar Issa.

Short answer – no real impact has been witnessed following the return of “isken” loans announcement earlier last month.

Yet we remain confident in the outlook of economy following the recent past difficult years – especially in the outlook of real estate market. Our confidence stems from the fact that while the real estate sector in Lebanon has been indeed burdened by the sluggish economy and by the recent absence of low-rate loans, it remains solid given that the demand is real. Lebanese residents as well as Lebanese expats have a real desire of owning real estate in Lebanon and this is the key factor supporting the real estate market in Lebanon

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