Interview. Property mogul Ovidiu Sandor: Banks and developers looking to replace Prima Casa

The coming into force of the debt discharge law, which has effectively frozen financing, and concerns about the future of the government-guaranteed mortgage lending program Prima Casa will force bankers and developers alike to become creative, Romanian real estate investor Ovidiu Sandor tells BR. The businessman is preparing to kick start a residential project of his own in Timisoara this autumn.

Simona Bazavan

The residential market is looking at a period when it will have to resettle/rebalance itself given the effects of the debt discharge law and the potential change to the Prima Casa program, real estate investor Ovidiu Sandor recently told BR in an exclusive interview. However, regardless of these developments, housing demand is on the rise in big cities across the country, which means the disruption should be only temporary, he stressed.

“All that Prima Casa has been is a financing tool available to a wider audience than what had previously been offered. I think we all remember that back in 2005 or 2006 one could hardly get a conventional mortgage at all. However, in the meantime, banks have refined their offers. They need to circulate money and there obviously are people whom banks can lend that money to,” he said. This means that banks and developers will look for ways to replace Prima Casa with similarly accessible tools, although the debt discharge law complicates matters, thinks Sandor. “It is an controversial aw. There has been a desire to take revenge on the banking system, but this is a misconstrued revenge as the target should have been the abusive clauses in some lending agreements. What is happening now is a fool’s revenge which will prevent the next generation of young people taking out a loan under simpler terms,” added the businessman.

Despite the debt discharge law, banks will come up with increasingly refined tools to ameliorate its effects, which will replace as far as possible Prima Casa in terms of accessibility, he added. Sandor also expects there to be amendments to the debt discharge law to make it more reasonable.

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At the end of the day, banks and developers will have to work together and come up with financing solutions to support the existing demand in the market. “I expect both banks and developers to be creative. This is also what I have set out as an objective for our residential project in Timisoara. We want to come up with our own financing solutions for our prospective buyers which we would negotiate with a bank,” said Sandor. Customized financial plans already exist on more developed markets and they can be a source of inspiration for local players as well, he believes. “We are not reinventing the wheel. We only need to choose and introduce such tools and make sure the market understands them. The need for this is certainly there,” he commented.

On the home straight: big plans in residential

The investment the businessman has recently announced that he will start in Timisoara is his first venture on the residential segment. Sandor has a strong background in the local real estate sector. He developed the City Business Centre (CBC) office project in Timisoara which he sold to NEPI in early 2012 for an estimated EUR 90 million. He is now developing another office project – The Office – in partnership with the real estate investment fund in Cluj-Napoca.

“My experience so far has to do with office developments, but in real estate, like anywhere else, one must look at what the market’s needs are. What we have been seeing for over a year is an increased appetite for residential acquisitions. This comes after a long period when, whether because of financial strains or a lot of reluctance, people preferred to wait and see,” he outlined.

The project in Timisoara will be built on a 53 ha plot of land that Sandor has consolidated over the past couple of years. It will feature a total of some 1,000 apartments as well as office space for which the developer expects to invest a total of EUR 130 million over the next four to five years. “This is a project that we will develop in various phases. A thousand apartments is not a small amount for Timisoara and we are probably talking about three to four years to complete them. This is what we predict right now to be the sales rhythm but this will obviously be adapted to the market’s potential and the latest economic developments,” he noted. Most of the estimated investment will be coming from bank loans, but Sandor says he is also considering bringing in a potential partner.

The first apartments can be bought off plan this autumn and the actual construction will start early next year. In early 2018 the developer plans to finish the first apartments as well as about 16,000 to 18,000 sqm of office space. While competition in the office segment has been tightening in recent years in the main regional cities, Sandor says the market has the capacity to absorb that. Quality class A offices, in particular, are sought after and Sandor plans to build on his experience in Cluj-Napoca where he is developing The Office, a class A office project, in partnership with NEPI.

As for the residential segment, the Romanian entrepreneur is betting on a similar strategy. “We want to redefine what quality living means. I strongly believe that when it comes to a block of flats, this means much more than the quality of its fittings. The quality of life an apartment offers has to do with everything that surrounds it, from the natural setting to easy access to work, shopping and entertainment such as restaurants and culture venues,” he said.

The residential project in Timisoara boasts a central location close to the city’s downtown. It is also located on the banks of the Bega river, which Sandor says he wants to make the most of. “We are targeting young professionals who are part of what I like to call the ‘creative class’, meaning they are working in industries that include IT, consultancy, marketing, advertising or who are freelancers or entrepreneurs. They are young people who maybe don’t yet have a family and who want to enjoy everything city life has to offer,” he outlined. There is also interest coming from middle-aged potential buyers who may already own a property in the suburbs, but who want to relocate downtown due to the advantages city life offers, went on the businessman.

For this reason, the project will feature several types of housing units that can accommodate various needs as well as budgets. Prices will start “in the range of Prima Casa”, meaning around EUR 60,000, but will go beyond that. “What we have set out to do is to start from the average market price, to which we will add a premium since it has an outstanding position and it will be an outstanding project. However, this will not be a high premium,” concluded the businessman