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PRAGUE-The Czech government has approved a bill to guarantee loans for construction companies or individuals to build rental housing in a dual effort to boost the frozen construction industry and tackle a nationwide housing shortage.

The bill guarantees loans for either up to 70% of the cost of construction or CZK1.5m ($87,057) per flat for companies building rental apartments, Prague Post reported. The money will come directly from the state fund for housing development. The loans will be available to any company or individual who invests in rental housing construction. The government loan system comes in response to growing complaints from developers on the difficulty of securing loans to fund new projects.

The aim is to boost investment in rental apartment construction, helping both the dismal state of the building industry and those struggling to find an affordable flat, said Prague city councillor Jiří Janeček. Building permits awarded this year dropped by 10% and the number of new flats by 5.7%, Czech Statistical Office figures show. In the third quarter, new domestic construction orders plunged 26.4%. The sector is showing the first signs of recovery, but uncertainty remains and it is still extremely difficult to secure financing for development projects, so any aid from the government is appreciated, said King Sturge investment consultant Dušan Šťastník. “Compared with previous months, there are more positive expectations. Some developers and professionals believe they can see the light at the end of the tunnel.” But it is way too early to talk about a general market improvement, he cautioned.

Allan Saundersonis a managing editor of Property Finance Europe and a contributor to GlobeSt.com.

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