The big banks are also calling for public aid to finance new land developments
source Idealista
In a recent conversation between leaders in the banking sector, the need to implement public aid to facilitate the financing of new land developments in Spain was highlighted. Oriol Forner from Caixabank, César López from Sabadell and Javier Piñeiro from Santander agreed that this type of support is crucial to boost the real estate market and overcome certain limitations inherent to the financial system and land development.
Javier Piñeiro stressed that, from a business and risk perspective, the traditional developer is the best credit profile due to their experience and background. However, although Santander is willing to finance land, there are regulatory constraints that influence the viability of many projects. He indicated that promoters must assume more equity risks, since it is not sustainable for banks to finance the entire project.
Oriol Forner explained that although “build to sell” operations are the clearest for banks, the current regulations do not facilitate the financing of land developments. He also underlined the importance of initiatives such as the Vive Plan, which has had a positive impact on the future of affordable rental housing in Spain.
César López de Sabadell pointed out that financing land under development is almost impossible due to the uncertainty of terms and benefits. He reiterated that, although they have been active in the field of ‘build to rent’ (BTR), their participation in flex living projects is mainly limited to residential land.
The general consensus is that alternative financing fills some gaps that banks cannot fill, but it also reflects the need for more caution and innovation. Javier Piñeiro said that banks have already faced similar challenges with the BTR and anticipates a similar evolution for flex living. “At the beginning it is difficult, but in the end we will do it as always,” he said.
Oriol Forner emphasised the persistent demand for housing and highlighted the importance of coexistence between traditional banking and alternative financing options. He also indicated that, despite the resources and developers available, the lack of land and skilled labor are significant obstacles.
Finally, the executives agreed on the need to guarantee the exit of the financing through a public commitment. Javier Piñeiro suggested that having public guarantees backed by autonomous communities could change the viability of land financing. César López added that whenever banks finance, they must be able to foresee an established exit.
Banking leaders reaffirmed their commitment to the Spanish real estate market, despite the current barriers. With a system of public guarantees, a safer environment can be facilitated for the financing of new land developments, thus promoting a more stable and balanced market.
