CZECH REPUBLIC Trends and Developments Contributed by: Filip Čabart, Štěpán Černý, Filip Šperl and Lukáš Janečka, HAVEL & PARTNERS
Czech National Development Bank Launches Affordable Housing Programme This spring, the Czech National Development Bank, in co-operation with the Ministry for Regional Devel- opment, launched the Affordable Rental Housing Programme. Within a broader framework, this initia- tive is part of the Czech Republic’s National Recov- ery Plan, which is partially financed by the European Union through the Recovery and Resilience Facility (RRF). The European Commission has approved the programme as compatible with EU state aid rules, specifically under Article 107 (3)(c) of the Treaty on the Functioning of the European Union (TFEU). The programme addresses the country’s worsening housing situation. According to a regulatory impact assessment conducted by the Ministry for Regional Development, at least 620,000 households – rep- resenting over one million residents – face housing costs exceeding 40% of their disposable income. This accounts for nearly 10% of the Czech Republic’s pop- ulation. Given this fact, the overarching aim of the pro- gramme is to improve the availability of rental housing in the Czech Republic by supporting the construc- tion, renovation or acquisition of rental apartments and apartment buildings. This initiative is therefore expected to provide targeted support to households facing challenges with housing affordability. Financing and key parameters A total of CZK2.25 billion (approximately EUR92.5 mil- lion) has been allocated to the programme. Funding will be distributed to applicants with eligible projects in the form of subsidised loans, covering up to 80% of the overall eligible project expenditure. The main parameters of these loans are: • loan size – CZK100 million to CZK1.2 billion (approximately EUR4–49 million); • interest rate – fixed for the entire repayment period, set at the EU base rate for the Czech Republic, with a minimum of 1% and a maximum of 2%; and • repayment period – 20–25 years. Applicants must contribute their own funds and/or secure a senior loan to cover the remaining 20% of the project expenditure.
financial corporations since 2021 was recorded in Q4 2024. However, access to bank financing remains challeng- ing for specific segments, particularly start-ups and small enterprises. In other cases, bank financing may not be advantageous for a company due to its rigidity, longer approval process and associated higher costs. In recent years, the Czech financial market has thus seen a shift away from traditional corporate bank financing towards alternative forms of financing, such as crowdfunding (some crowdfunding companies on the Czech market are indirectly owned by banks), pri- vate equity or venture capital. Another alternative is intra-group financing. According to the Czech National Bank, as stated in its Financial Stability Report (Autumn 2024), there was a sharp year-on-year increase of 24% in intercompany debt in the first half of 2024. In the Czech market, intra-group financing is particu- larly relevant due to the high proportion of foreign owners of Czech companies, which are therefore often integrated into large multinational groups. As a result, intra-group financing represents one of the most commonly used forms of financing within cor- porate groups, as it can be adapted to the needs of the company. Among the advantages of intra-group loans is faster processing, as companies within the group are not required to conduct legal due diligence or the KYC processes mandated by banks, nor do they need to engage in protracted negotiations regarding loan terms with financial institutions. Compared to bank financing, there are also cost savings on fees such as arrangement fees or commitment fees, which the company would otherwise have to pay to the bank. Moreover, borrowers in intra-group financing do not have to provide a wide range of security or extensive representations and warranties. On the other hand, companies using intra-group financing are limited by the need to comply with trans- fer pricing rules (the arm’s length principle must be fulfilled) and the thin capitalisation rule.
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