Scheme offering cheap loans for young flat-builders gets underway

The housing situation in the Czech Republic has long been a painful issue with no viable solution in sight. Over the past few years, Czech governments have come up with various schemes to support housing construction and make small, so-called start-up flats available to young families. Just a few days before the June general elections, the Social Democratic government has introduced low-interest loans for young people but, as Alena Skodova reports, there is a catch.

As of Monday, young families can apply to the state for a relatively cheap loan to build a flat. The Social Democrat cabinet says the scheme will help solve the ailing housing situation in the country; some analysts however say that far fewer people than had been originally expected will be able to take advantage of such loans.

Young people can take a loan of up to 200,000 crowns, which they'll have to pay back within ten years, and the interest rate will be only 3 percent, much lower than if they took out a regular mortgage. Applicants have to be under 36 - in the case of a married couple that applies to both of them. The leader of the Social Democrats in Prague, Petra Buzkova, is an advocate of the loan system, and also points out that it is not a wholly new thing:

"It's not a new loan, we only lacked the funds to implement it before. But this housing loan did not start only this year, it has already been in existence for several years."

But the state has only allocated some 350 million crowns for these loans this year, which means only some 1700 applicants can get it. Some experts say that the government's scheme is not as generous as it may have appeared. The rules for getting such a loan stipulate that the application must be accompanied by a planning permit. That means the loan is only available to people planning to build - and rules out people who want to buy a flat which has been completed or a flat which is under construction. As having your own home built is more common in the country, the scheme will not benefit people in cities where there is a lack of flats.

But there's more. The law says only people who build themselves - not people who hire building companies - can avail of the preferential loan. Officials from the State Fund of Housing Development are aware of this shortcoming, but say they have to obey the governmental regulation. They admit, though, that young applicants have already begun complaining about the scheme.

The Social Democrat government has described the building loans as a significant part of its social policy, but the leader of the opposition Freedom Union, Hana Marvanova, an expert on housing legislation, says the loans are coming too late:

"A 200,000 crown loan, as approved by the Social Democrats, is a nonsense, and it will help just a few people. It also creates ideal conditions for corruption. Had the Social Democrats wanted to solve this problem, they should have done it four years ago, when this government came into office."