Michael McGrath (Cork South Central, Fianna Fail)
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145. To ask the Minister for Finance the organisation which will be underwriting loans for home building finance Ireland, either HBFI itself or NAMA; the way in which NAMA and HBFI will interact; if HBFI has flexibility to provide different types of finance from guarantees to mezzanine finance; if it is strictly confined to providing loans; and if he will make a statement on the matter. [44054/17]

Michael McGrath (Cork South Central, Fianna Fail)
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146. To ask the Minister for Finance the percentage of the funding of residential construction projects home building finance Ireland, HBFI, will provide; if there is an upper limit on the amount it can provide; the restrictions in place in terms of collateral needed for projects; and if he will make a statement on the matter. [44055/17]

Michael McGrath (Cork South Central, Fianna Fail)
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147. To ask the Minister for Finance the qualifying characteristics needed for a builder or a developer to obtain finance from home building finance Ireland, HBFI; the protections put in place to prevent HBFI crowding out funding from alternative sources; and if he will make a statement on the matter. [44056/17]

Michael McGrath (Cork South Central, Fianna Fail)
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148. To ask the Minister for Finance the expected cost of funding charged on the loans home building finance Ireland, HBFI, will provide; the way in which the 2,000 houses per year estimate for HBFI was established; the way in which the 6,000 estimate was established; and if he will make a statement on the matter. [44057/17]

Michael McGrath (Cork South Central, Fianna Fail)
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153. To ask the Minister for Finance when he expects the HBFI to be up and running; when he expects the fund to commence lending; if the scheme has been given state aid approval by the European Commission; the way in which he expects the HBFI to be compliant with state aid rules; if he expects the HBFI to be affected by the state aid complaint already in process on NAMA; and if he will make a statement on the matter. [44062/17]

Paschal Donohoe (Dublin Central, Fine Gael)
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I propose to take Questions Nos. 145 to 148, inclusive, and 153 together.

As announced in my Budget speech on 10 October 2017, it is my intention to establish Home Building Finance Ireland (HBFI) to provide funding on market terms to viable residential development projects whose owners are experiencing difficulty in obtaining debt funding. 

HBFI will be a stand-alone entity which will provide funding directly into the market.

HBFI will be designed to leverage off the extensive experience already available to the State to deliver this initiative and as such existing NAMA staff skills and expertise will be utilised to deliver this funding. However any lending provided in due course will be provided by HBFI which will be fully separate and will not impact NAMA's existing objectives or its Board’s strategic wind down plans. The exact staffing and servicing arrangements are currently being devised by my officials and NAMA and will be confirmed in due course.

In relation to the products that will be offered by HBFI, the fund will be designed to focus on the provision of debt funding to viable residential development projects. As the Deputy will be aware, the State is already providing a number of alternative supports into this market, including equity finance, through the ISIF’s existing residential development funding platforms.  

I am not in a position to confirm the specific product terms and conditions requested by the Deputy, as these will be set by the board of HBFI in due course. I can confirm that HBFI will be lending on commercial, market-equivalent terms and conditions, which would depend on the risk profile of each individual project, the quality of collateral and the creditworthiness of the borrower. This approach would be akin to a bank or private equity investor, in that HBFI would not be directly involved in development – its role would be solely as a commercial lender. Commercial viability testing will also ensure returns are the same as market norms.

With a proposed allocation of up to €750 million, the HBFI could have capacity to fund about 6,000 homes in the coming years. The current estimated shortfall in residential supply is 15,000 – 20,000 units per annum and, accordingly, the HBFI, with an annual average delivery of 2,000 homes, would reduce this shortfall by about 10% (assuming a three year horizon). This would be a significant contribution but it would not make HBFI a dominant player in the residential funding market and it would clearly leave room for banks and other finance providers to increase their contribution to funding much-needed residential development. 

I can confirm that the delivery estimate included in the Budget documentation was based on an assumed delivery cost of €250,000 per unit and an assumption that HBFI would recycle the allocated funding once over an estimated three year time horizon.

In relation to State aid issues, the proposal has been designed to provide lending to the market at commercial rates. The establishment of the fund will be discussed with the European Commission over the coming months and my officials have already had preliminary discussions with the European Commission in relation to the initiative. As advised, there is clear legal separation between HBFI and NAMA and the proposal will not impact NAMA’s mandate or wind down plans. As a result, I do not envisage any impact from this proposal on the existing State aid complaint in relation to NAMA currently under consideration by the European Commission.

Finally, I would be hopeful of bringing the establishing legislation to the Houses of the Oireachtas for approval in late 2017 or early 2018, with a view to HBFI commencing operations in Q2 2018. It is not expected that HBFI will have an indefinite lifespan but it is too early to speculate on how long it may operate as this will depend on the availability of funding in the market to meet demand for homes in the coming years.