AIB fund will boost house building so long as terms are realistic – CIF

The move by AIB to create a new housing development fund will help generate more house building and boost construction activity around the country, according to the CIF.

However the Federation has also warned for the provision of finance to be meaningful, the terms and conditions around the fund will need to reflect the current market conditions.

In recent years there has been a very limited level of development finance made available to Irish construction companies. This has impacted on the level of housing being built around the country.

Furthermore where development finance has been made available, Irish construction companies those seeking it have been required to provide a very high level of equity for the development project in question. Equity regularly represented 50% or more of the total value of the development project has been required.

The CIF cautions that with the construction industry in this country having gone through 7 years of decline, Irish construction companies do not have access to that level of equity.

“We welcome the announcement by AIB that they have put together a €350m development finance fund that will help increase the level of construction and supply of new homes in Dublin, Cork and Galway,” said CIF Director General Tom Parlon. “This is a positive initiative which is badly needed. The CIF has been meeting with the main financial lending institutions in the country in recent months and stressing the need for this type of fund to be put together. So we are delighted to see that AIB have taken this suggestion on board.

“However the terms and conditions around the AIB fund and other development finance will need to reflect the current practicalities of the market if this finance is to be used. Irish construction companies do not have access to large levels of equity at this moment in time. If we want to see more house building taking place in the areas where it is needed, then the equity requirements will have to be manageable and realistic. Otherwise that financing will go unused and will not boost the supply of extra housing where the market is demanding it,” Mr. Parlon concluded.

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