The Irish government’s plans to tackle the housing shortage are nothing if not ambitious. Taoiseach Simon Harris has already promised in his first months in office to increase the current Housing for All target of building 33,000 new homes a year to 50,000 for the next five years.
That possibly wasn’t music to the ears of Harris’s Finance Minister Michael McGrath, who has been told the new target will cost €20bn annually – €6.4bn more per annum than the present Housing for All budget.
There’s no detail yet as to where the extra funding will be found or how it will be funnelled into residential developments going forward. But one possibility is an extension to existing government-backed funding schemes, such as Home Building Finance Ireland (HBFI).
What is HBFI?
Established in 2019, HBFI is a state-backed lender providing commercial financing for residential development projects. It was set up with an initial loan fund of €730 million, and a target to deliver 7,500 new homes over five years.
HBFI has since surpassed that initial goal, with total approvals reaching €1.66 billion financing the construction of 8,495 homes.
HBFI funding products
HBFI offers various products tailored to different development types. The criteria for each loan varies by product. The main variables by product are as follows:
- Small Development (up to €3 million): Ideal for smaller projects, offering dedicated support, gearing of up to 80% of the total cost of the development, margins of 4.75-7.5% (over 3-month Euribor), 5-year terms, and 1% entry & exit fees (waived for social/affordable housing).
- Housing & Apartment Developments (from €3 million): Provides funding for larger projects with similar gearing, terms, margins, and fees as the small development option.
- Social/Affordable Housing Development: Supports developments pre-contracted to approved entities like local authorities. Offers a higher gearing (up to 85%) and slightly lower margins (4.5-6.5%) with an entry fee (up to 1%) but no exit fee. Ideally, the site should have planning permission secured or in progress.
- Green Funding: Encourages sustainable development. Projects certified to Home Performance Index (HPI) standards can receive a discount on margins (up to 0.5%). Early engagement with HBFI is crucial for HPI considerations.
- Accelerate: Launched in 2023, this product assists large developers with a proven track record of delivering large-scale schemes (100+ homes). It can be provided solely by HBFI or co-financed with other lenders. Key features include unlimited project size limits, gearing of up to 70% and case-by-case assessment of margins and fees.
Across all products, HBFI typically requires a first ranking full fixed and floating charge over the assets of the Special Purpose Vehicle (SPV)/borrowing entity, including the project.
Planning permission is usually necessary for finalising loan agreements. However, HBFI can assess projects with pending applications and disburse funds upon approval. Funding can be used for purchasing development sites, but specific criteria may apply depending on the chosen product.
How to apply
The initial application process for HBFI loans is informal – you are simply asked to submit an enquiry form via the HBFI website. You will then be connected by the HBFI team to answer further questions about your project and your suitability for HBFI products. If your project is deemed suitable, you will be guided through the application process. Only commercial entities can apply.
Speak to an expert
Having a clear understanding of whether an HBFI loan is the best option for your development, and being able to demonstrate how you fulfil the criteria persuasively, will help you get the most out of any financing arrangement. Xeinadin’s Property and Construction team has vast experience in the field of construction and property development finance, and we’d be delighted to help you at any stage. Contact our team today.
