How Cyprus is resolving billions in non-performing loans
Cyprus has made significant progress in clearing billions of euros in non-performing loans (NPLs) from its banking system, but the approach has been far more reliant on negotiated settlements and restructuring than on property auctions. Official data from the state-owned asset manager Kedipes and the Central Bank of Cyprus (CBC) show a clear preference for voluntary agreements, which has important implications for property buyers, investors, and homeowners.
As of mid-2026, Kedipes had resolved loans with a nominal value of €5.60 billion, representing 76% of its original €7.37 billion portfolio. Of that, €2.03 billion (36.3%) involved restructuring, €1.39 billion (24.9%) were full settlements, and €1.25 billion (22.4%) were voluntary property-for-debt swaps. By contrast, only €362.8 million (6.5%) came from properties recovered after auction. The remaining solutions included €449 million in collections on overdue loans and €108.5 million through property transfers under the mortgage-to-rent scheme.
The Rent Against Instalment scheme: a safety net for homeowners
One of the most distinctive features of Cyprus’s NPL strategy is the Rent Against Instalment scheme, run by Kedipes. This is not a conventional loan restructuring. Instead, Kedipes acquires the primary residence, and the participating lender receives 65% of its assessed market value, writing off the remaining mortgage debt to the extent it is not secured by other collateral. The former owner stays on as a tenant, with the state covering the rent and the occupant paying just €1 per year.
A standard tenancy lasts 14 years, with lifetime occupancy available in certain cases, particularly for older tenants. The former owner or a first-degree relative can buy the property back between the fifth and fourteenth years at a price set out in the rental agreement. This offers an escape route for households with little realistic prospect of resuming mortgage repayments, although they give up ownership in return.
As of the latest update, 1,307 of more than 4,500 applications had been approved, and 978 homes had been brought into the scheme. Kedipes expects the eventual total to exceed 2,000 homes.
Foreclosures: a last resort, not the norm
The trend extends beyond Kedipes. A Central Bank analysis from September found that primary residences accounted for just 6% of completed foreclosures between January 2022 and March 2026, while agricultural land represented 61%. Around 30% of cases where foreclosure notices were issued ended in consensual settlements, with another 5% still under negotiation.
This data underscores that foreclosure is a last resort. However, it does not remove risks for individual borrowers. The foreclosure framework provides for restructuring assessments and formal notices, as well as avenues for eligible borrowers to seek assistance from the Financial Ombudsman or challenge proceedings in court. Deadlines are important, and going to court does not, by itself, halt a foreclosure.
מה המשמעות עבור קוני נכסים ומשקיעים
For property buyers and investors, the emphasis on negotiated settlements has several implications:
- Fewer distressed properties at auction: With only a small percentage of NPLs ending in auction, the supply of distressed properties may be limited. Buyers seeking bargains should be prepared for a more competitive market.
- Title deed risks: In any property transaction, especially involving distressed assets, it is crucial to verify that the seller holds clear title deeds. In the north of Cyprus, title deed issues are common; always seek independent legal advice.
- Legal and tax advice: The rules around NPL resolutions are complex. If you are considering buying a property that has been involved in a restructuring or settlement, consult a Cyprus lawyer and tax adviser to understand the full implications.
Financial impact and write-offs
Kedipes reported total loan recoveries of €2.68 billion and contractual debt write-offs of €2.50 billion by the end of June. For creditors, voluntary agreements can shorten recovery proceedings. For households, avoiding an auction does not always mean retaining the deeds. An agreed transfer of property can close a debt dispute, but borrowers still need to establish whether the settlement extinguishes the outstanding balance and what it means for any additional security or guarantors.
נקודות עיקריות להבנה
- Cyprus is resolving NPLs primarily through restructuring, settlements, and property-for-debt swaps, not foreclosures.
- The Rent Against Instalment scheme allows vulnerable homeowners to stay in their homes as tenants, with the state covering rent.
- Primary residences are rarely auctioned; agricultural land accounts for the majority of foreclosures.
- Buyers and investors should verify title deeds and seek professional advice when dealing with distressed properties.