The new Croatian Act on Subsidies and Government Guarantees for Housing Loans

In February 2011, the Government of the Republic of Croatia accepted the proposal of the new Act on Subsidies and Government Guarantees for Housing Loans (Act). The Act has not yet been adopted by the Parliament; it is, however, expected to be enacted in March 2011. The Act shall replace the Act on Inducement of Housing Purchase dated March 2010, whose purpose was also to overcome the stagnation in the real estate market. The proposed new Act is considered to be more effective due to the fact that the Republic will provide for irretrievable subsidies.

The purpose of the Act is to overcome the unfortunate situation in the Croatian housing and construction market and help citizens solve their housing problems. At present, about 10,000 apartments remain unsold on the Croatian real estate market, with an aggregate value of app. EUR 700,000,000. Stagnation in apartment sales was observed in 2009 and 2010 and the trend will most likely continue in 2011. 

The Act regulates subsidizing loans taken from Croatian commercial banks for the purpose of purchasing an apartment. Furthermore, the Republic of Croatia guarantees to the Croatian commercial banks the payment of interest on housing loans that one cannot repay due to a sudden loss of income.

The subsidizing of loans can be requested in the period from enactment of the Act until 31 December 2012. Guarantees can be requested until 31 December 2011. The means for subsidies and guarantees will be provided from the State budget and transferred to the account of the Agency for Transactions and Mediation in Real Estate (Agency).

Individuals will be granted a subsidy for the purchase of a new apartment, if the following criteria are fulfilled:

  • Individuals must be Croatian residents;
  • They must satisfy the conditions of the commercial banks for obtaining a housing loan; 
  • They are not older than 45 years of age;
  • They are not (nor are their spouses) the owner of an apartment or house, or owner of an apartment or house that they intend to sell for the purpose of purchasing a larger apartment or house;
  • The apartment or house is directly bought from the investor or former owner;
  • The selling price incl. VAT does not exceed EUR 1,900 per sq m;
  • The loan does not exceed EUR 100,000;
  • The repayment period is 20 years or longer and
  • The effective interest rate (which includes all costs and compensations under the loan agreement) for the first four years of repayment of the loan does not exceed 4.95% per year.


An agreement with regard to the subsidized loan needs to be concluded between the creditor (individual buying the apartment and searching for a loan), the commercial bank and the Agency which acts on behalf of the Republic of Croatia.

By providing a guarantee for the repayment of interest, the Republic of Croatia takes the responsibility to repay the accrued interest, should the creditor unexpectedly become unemployed and hence unable to repay the interest on the overdue loan. This obligation of the Republic of Croatia will, however, not exceed one year from the date of the creditor's inability to repay the loan. The same conditions apply for obtaining a guarantee as for obtaining a subsidy.


Birgit Kraml