Information for Clients

Recently, a number of Western companies have developed analytical study on the investment attractiveness of the real estate market in the Czech Republic. The answer was unanimous. Property in the Czech Republic today is a serious concern for investors. The market access for investors is guaranteed by a favorable investment climate, the inviolability of private property, the continued trend also increases the value and the excessive demand for high quality property.

The most interesting options include; commercial construction (houses, night clubs, restaurants, modern discos) and residential (houses and flats) objects. The trend is the purchase of real estate by foreigners, including Russians who buy small plots of land (500-700 m2) and the consecutive construction of houses for sale. Instead of being sold, they are put into rent. The fact is that the average annual increase in the cost of real estate in Prague is 3-12 %.

Most of those who want to live in the Czech Republic, ask themselves; what kind of business activity is the most profitable?

Most foreign companies specializing in the analysis of trends in the Czech market have agreed that for this period by far the most interesting, reliable and profitable business in the Czech Republic are the different types of investment in the Czech real estate market. There are several dozen circuits that generate real profit. One of them is the construction of houses in Prague and its vicinity.

The average cost of building a house (including land and legal documents) consists of 70k to 150k euro. Another option is the construction of prefabricated houses following by the apartments being put into rent.

The greatest demand in the local market are the small apartments (2 bedrooms and a kitchen). There is a queue of realtors who want to get the right to sell them. The main issue is finding a suitable plot. The construction itself requires 6 months of time. Subsequent processing of legal documents takes up another 3.

To date, the Czech Republic also allows mortgage for foreigners. This was possible due to favorable changes to the rules of loans in the banking system of the Czech Republic, which arose after the Czech Republic joined the EU.

If you are already familiar with the terms of the purchase of real estate, you should know that real estate are bought by foreigners without permanent residence permit with the use of legal entities (companies). In most cases, the newly based legal entity becomes the mortgagor, and then acquires the property.

The main parameters of mortgage loans are:

1. Loan terms.

The credit is granted for a period of 5 to 30 years, with the possibility of extra payments.

2. Fixation and the interest rate.

The bank is not allowed to change the interest rate and the period during which you have a fixed rate. The rate is established at 1-5, 10, 15 years. This condition is a guarantee of financial security because it is protected against a rise in interest rates. However, each extension of the loan for 1 year increases the rate by an average of 0.3%.

3. The rate of mortgages in Czech Republic.

Interest rates depend on market conditions and the particular bank. To date it ranges from 4% to 7%.

4. How to get a mortgage in the Czech Republic.

* One-time payments with the necessary part of the price of real estate, as in the case of purchases of second homes, land, etc.

* Gradual - for example; when buying real estate, construction, reconstruction...

Mortgage credit is also given for the purchase of foreign real estate. Despite this you must have property in the Czech Republic.

5. Payment

Payment takes the form of regular monthly payments (annuity) before the full repayment of the debt.

6. The purpose of the loan

* Purchase of real estate, construction, reconstruction,

* Refinancing of previous projects

* Refinancing of an existing loan with another bank

It is possible to get a mortgage without a purpose – a so called “American mortgage”. The conditions are very different from conventional mortgages. These include: financing up to 50% of the deposit and higher credit (8-9%).

7. The financing of facilities such as:

* Residential houses and flats

* Properties used for relaxation purposes (houses, cottages, etc. )

* Land

* Certain types of commercial real estate (offices, administrative buildings)

   The conditions for the company are:

* The founders must be natural persons.

* Loan agreements with the Bank must be signed by all founders.

* The company should have only one type of activity secured at the Commercial Court; "rental of properties, apartments and office space without providing other services."

Conditions for the mortgage:

* A bank lien on the property.

* Sufficient solvency of the client.

* Property insurance in case of natural and other disasters, the minimum loan amount (the price is indicated in the examples).

* Also it is strongly recommended for the recipient to get a life insurance. This will guarantee payment of the loan in case of the loss of ability to work.

Loans without proof of income are officially entitled to be received only the citizens of the Czech Republic and persons with permanent residence in the Czech Republic. The loan may be accepted up to 50% of the value of the real estate with an interest rate of 6.5 to 7.5 %.