Michalis Hadjipanayiotou: The Cyprus real estate environment has changed dramatically over the past decade

In this Special Feature, Michalis Hadjipanayiotou, Chairman of the Cyprus Land and Building Developers Association, discusses the current state of large-scale real estate development in the country, actions to raise Cyprus’ building stock, and how to expedite the sector’s green transition.

In the past decade, investor interest in large real estate developments was concentrated in four areas: high-rise commercial and residential buildings, tourism-related projects, schools/colleges and hospitals. Is this still the case?

The Cyprus real estate environment has changed dramatically over the past decade, with a positive impact on foreign investors, tourists and local residents. Real estate developers embarked on a variety of projects, from iconic landmark buildings that are especially eye-catching, giving us a competitive edge internationally, to large-scale developments like marinas, golf courses and, most recently, the integrated casino resort. As you correctly point out, the infrastructure sector went down a similar path. Many of these projects are approaching delivery, while others are still at the planning stage. Smaller projects, however, have continued to bubble under the surface, covering a wider range of needs that should certainly not be overlooked. We have seen a significant increase in small residential projects, mostly addressing young couples looking for high-quality living without having to spend large sums of money on building a house. Gated communities and small apartment buildings are perfect examples of a trend that serves both the local community and foreign families relocating here with their companies. I expect that the public’s interest in these types of projects will continue to be strong; they respond to modern trends while meeting buyers’ needs in and around our city centres.

You mentioned the arrival of many non-Cypriot professionals, which, due to the Government’s headquartering initiative, has ballooned the population significantly – perhaps by 10%. How will this overflow affect large real estate development? Will it give a renewed impetus to the construction of high-rise buildings?

It will affect development, of course, and we welcome this shift at all levels of our economy and lifestyle. Such initiatives are integral to our ecosystem and I am confident the new Government will continue to push for progress – instigated by the previous administration – to attract more headquartering with further incentives. So much good work has already been done and we are keen to sustain this upward trajectory. Population growth is having an impact on the real estate industry but it is not exclusive to high-rise buildings. While supply and demand drive the market and taller buildings do have immeasurable advantages, they don’t answer everyone’s needs. Properties with a unique identity, outdoor space, or part of a resort with facilities and services are just as highly sought after. However, our biggest challenge continues to be securing housing for all. The Government must speed up various processes, such as issuing building permits for residential projects while eliminating bureaucracy. Obstacles like these can negate all the joint efforts we are making across the sector. This is the only way to meet the already high demand for housing and bring real estate prices under control.

This recent growth has also shown that there are not enough schools to cater to the children of foreign employees. How can we speed up the construction of such schools so as not to lose the brainpower that has arrived on the island?

We have identified a gap in the education sector and it is a problem we can’t afford to neglect. Action has already been taken but there is plenty more that can be done to encourage a smooth transition for people relocating here with their families. Securing a place in a school for their children is imperative so procedures need to be more efficient for both the issuance of construction permits and the operation of new schools. The key players in the education sector will need to be increasingly proactive, pinpointing the needs of the market in advance and taking on relevant projects to ensure these gaps are plugged over time.

The Ministry of Interior has announced that the fast-track licensing of town planning and building permits via digital portals will soon include large development projects. What is your opinion on the matter?

The regulations promoted by the Ministry of Interior have been particularly beneficial and, to a large extent, correspond to the needs of the real economy. However, more types of development need to become eligible for these fast-track procedures to increase the country’s building stock. The use of technology allows us to overcome many time-consuming procedures that existed in the past. I hope that the new Minister of Interior, who has experience in management and has previously tackled very challenging situations, will continue to support digitisation and the acceleration of permit processes.

How might a possible recession affect the real estate sector?

High inflation is an issue across the board but it seems that Cyprus’ real economy is responding better than anticipated to the ECB’s interventions and the current environment of interest rates. We are aware that any effect on markets with which we are directly affiliated, such as the European one, will also affect the domestic market. Based on the performance of key sectors of our economy, I have every reason to remain optimistic regarding our prospects. Both tourism and the development sector are showing signs of recovery despite the possibility of a recessionary environment. With the right interventions on the Government’s part, I believe that an economic slowdown will not have a significant impact on people’s living standards and employment.

What are some of the biggest challenges that developers face in securing green financing for large real estate projects? What solutions do you suggest?

Green financing, which is vital for the green transition of the land development sector and the economy as a whole, is indeed a priority. Let us not forget that our country is committed to meeting the EU’s ‘Fit for 55’ targets without yet developing a comprehensive plan on how to achieve them. Speaking on behalf of my industry, to date, anything that has been done was driven by private initiative, and the green transition has largely occurred due to consumer demand rather than incentives. Nevertheless, this problem will need to be resolved soon if we are to expedite our green transition. In this context, green financing must be a key part of any incentives that will be offered. These could range from low-interest loans for purchasing energy-efficient units and facilities to incentives for developers to use renewable energy sources and for energy auto-producers in their projects. These are only a few of the available options. Many European countries have already made significant progress toward the green transition, so I believe that the only way forward for Cyprus is to adopt good practices.

This interview first appeared as a Special Feature in the March issue of GOLD magazine. Click here to view it.