- Program provides subsidy for home buys to help construction
- Members to gain access to loans via bidding or sweepstakes
Hungary expanded its arsenal of state subsidies for home purchases to help revive the construction sector, triggering criticism that the plan offers inadequate protection and arbitrary criteria for savers.
Members of the new building societies, known as NOK, will be eligible for subsidies of up to 300,000 forint ($1,090) a year if they pledge contributions for 10 to 15 years toward the purchase of newly built homes, according to the bill approved on Thursday. The societies will hold sweepstakes to determine the order in which participants are awarded interest-free loans, the legislation said. They may also rank bids from members according to the amounts paid into the fund, or use a combination of lotteries and bidding.
The plan complements an earlier state housing program offering a 10 million-forint subsidy and a matching loan for larger families when they purchase a newly-built home. While the government said the NOK provides additional incentives for construction and for stopping the decline in Hungary’s population, opposition parties criticized the lack of state deposit guarantees on the savings, the selection methods and the narrow limits on the companies eligible to administer the scheme.
"The government is probably aiming to offer another option to boost the construction sector as home building is still at rock bottom," Gabor Sooki-Toth, head of research at Budapest-based real estate agent Otthon Centrum Zrt. said by phone. "This is not a cure-for-all solution. Although the system provides protection for the members, there are risks, too, such as the lack of a state deposit guarantee."
The Cabinet Office of the Prime Minister, which initiated the legislation, didn’t immediately respond to questions submitted by e-mail and a phone call on Thursday.
The transparency and security of the savings plan will be guaranteed by "strict legal conditions and strong supervision" by the central bank, the government said in a statement Wednesday. The plan is needed to supplement earlier savings programs which are predominantly used for refurbishment, not new construction, it said. Lenders including OTP Bank Nyrt. and Erste Group Bank AG have been offering subsidized home savings plans.