…with 1,700 households borrowing €58 million so far
28.02.2019
Progress toward rolling out €100 million of EBRD financing for green investments in the Romanian household sector is progressing well. Green home mortgages to buy energy efficient houses and apartments have proved to be extremely popular with GEFF Participating Financial Institutions Banca Transilvania and UniCredit Bank, as well as with their customers.
Households who buy energy-efficient homes benefit not only from lower interest rates but also permanently lower monthly heating and cooling costs as a result of living in an energy-efficient building rather than an ordinary home. As well as being cheaper to run, green homes are warm in the winter, cool in the summer, and achieve higher market values when sold. There is also a ‘lifestyle’ factor, with young families consciously choosing a home that maximises personal comfort while minimising personal impact on the environment.
There are also benefits for the financiers, particularly in the form of lower risk. Customers’ ability to repay is increased in homes with low utility costs, which in turn lowers the probability of default. Asset values are higher as a portfolio of mortgages for energy-efficient homes, which are constructed to higher technical standards than ordinary homes, represents a higher-value asset than a portfolio of ordinary mortgages. There are also benefits to helping an increasingly environmentally-aware customer base to invest in the greener lifestyles that they demand.
Environmental benefits are another important factor. 40% of energy consumption and 36% of CO2 emissions across the EU result from heating cooling and servicing buildings. Constructing energy-efficient buildings today means not only the first occupants, but also several generations of future occupants will have lower personal carbon footprints as a result of living in an energy-efficient home
The key to rolling out more than 1,000 green home mortgages in a short time period was to find a simple, low-cost way to identify eligible investments. In Romania, this has been to use Energy Performance Certificates (EPC) as the principal determinant of technical eligibility. As holding an EPC is anyway requirement of Romanian law when a dwelling is bought or sold, there are no additional certification costs for the household. This feature of the GEFF is particularly welcome by first-time home buyers faced with the costs of buying and furnishing their new home.
The final €15 million of EBRD lending for GEFF Romania is planned to take place in 2019 as well (financial institution to be announced), bringing GEFF Romania to its target value of €100 million.
By financing energy-efficient mortgages, EBRD is trail-blazing in a loan category that is likely to become mainstream lending practice in the EU countries over the coming years. For example, the ‘Energy Efficiency Mortgage Initiative’ (energyefficientmortgages.eu), an EU supported project, is seeking to promote green mortgages to banks based on core assumptions that investing in energy efficiency raises asset values and that borrowers who invest in energy efficiency are less likely to default. Romania GEFF can provide insight on the market for secured lending to buy energy-efficient homes, as well as for unsecured lending to insulate and equip older homes with energy-efficient heating, hot water, refrigeration, cooling and lighting.
As regards renovation loans for home improvement projects to increase the energy performance of dwellings, at present the legal ceiling of 100,000 RON (about €21,000) for unsecured loans is considered enough to meet the costs of a typical home renovation project.
A ‘lesson learned’ from this, the first residential sector GEFF in Romania, is that Romanian households have a real appetite to invest in green solutions, not only for the obvious financial and comfort benefits, but also as a lifestyle choice.
The GEFF is also raising awareness of the importance of factoring in energy efficiency when constructing or buying a new home. In 2017, EBRD’s consultants interviewed exhibitors selling apartments and houses at the National Housing Exhibition at the Palace of Parliament and found that very few knew about the EPC rating of the homes they were offering for sale. Many exhibitors had not even heard of the EPC! Two years later, the position has reversed, and developers whose units achieve ‘Category A’ EPC now advertise the benefits of energy efficiency to their potential customers.
The future definitely looks greener in Romania!
Customers of both Banca Transilvania and UniCredit Bank used GEFF green mortgages to buy apartments with ‘A-rated’ Energy Performance Certificates in this development.