Page last updated at 06:58 GMT, Thursday, 12 March 2009

Tenants offered rent-to-buy deal

Flats at Dumballs Road, Grangetown
Tenants at these Cardiff flats have an option to buy after 18 months

A developer says he is offering to help tenants beat the credit crunch and become home owners by taking their first 18 months' rent as a deposit.

Hekmat Kaveh, based in Worcestershire, has bought 90 one-bedroom flats at two locations in Cardiff which he plans to rent out at 500-525 per month.

He said tenants have an option to buy the new build apartments for 99,950.

The Council of Mortgage Lenders said: "Lending criteria have been tightened on new-build properties."

Iranian-born Mr Kaveh, 51, who trained as an architect before becoming a property developer in Malvern, said he believed the drop in property values "has or will flatten out very soon".

He said he had noticed an improvement in sales and rentals among his portfolio of more than 100 properties in the west Midlands.

A bulk-buy discount with builder Barratt Homes on Cardiff properties in Dumballs Road, Cardiff Bay, and Ty Glas Square, Llanishen, allowed him to give tenants the rent-to-buy option, he said.

Given the current economic climate we would be supportive of any measure that provides opportunities to inject fluidity into the housing market
Vikki Hiscocks, Chartered Institute of Housing Cymru

He said: "We are setting the sale price now. We certainly believe that in 18 months time the flats will be priced higher than they will be today.

"Obviously, the worst case scenario for the tenant in 18 months time is that they have just rented a flat.

"From our point of view, if we sell them, then we would still have made a profit on the sale in 18 months time, because of our purchasing powers by buying in bulk.

"If tenants don't buy, the most important thing is that tenants look after the place for us.

Flats at Ty Glas, Llanishen
The first 18 months' rent can be used as a deposit, says Mr Kaveh

"People tend to stay because they realise [the rent] is money in the bank for them, whether or not they decide to take up the offer."

The 90-flat purchase deal was brokered by estate agency Thomas and Rose, whose co-proprietor Sean McMahon, said: "With the pressure on the banks now to start lending, we're hoping that in 18 months time people will be able to secure funding.

"This way it is a true refund of their money."

Vikki Hiscocks, of Chartered Institute of Housing (CIH) Cymru, said: "Given the current economic climate we would be supportive of any measure that provides opportunities to inject fluidity into the housing market.

'Larger deposit'

"The scheme would appear to be a win-win opportunity offering benefits to both the developer and tenants/potential owners."

However, she said tenants should not be left in a vulnerable position if they later decided not to purchase.

Sarah Robson, of the Council of Mortgage Lenders, said the tenants may need a larger deposit than 10% because lending criteria had been tightened on new-build properties.

She said: "There are a number of incentives being offered by developers with criteria aimed at developers looking at trying to create interest in their properties.

"I haven't heard of this [scheme] but it's to be expected. It's a good thing for the developer if they can sell their properties.

"From a lender's perspective it's going to be a matter of assessing the individual property and its value and making a decision."

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