Subsidized Housing Loans with 1% Down Payment – Everything You Need to Know
Buying a first home is one of the biggest financial challenges for young people in Serbia. To make this process easier, the Government of the Republic of Serbia has adopted a Draft Law on Subsidized Housing Loans, which allows the purchase of real estate with only a 1% down payment and additional benefits during loan repayment.
In this article, find out who qualifies for this program, the key conditions, advantages, potential risks, and how this measure could impact the real estate market.
Who Can Get a Subsidized Housing Loan?
To qualify for this program, you must meet the following basic conditions:
✔ Age between 20 and 35 years – The program is designed for young people looking to buy their first property.
✔ Serbian citizenship – Applicants must have permanent residence in Serbia.
✔ First-time home buyers – The subsidy can only be used for purchasing a first apartment, house, or building land with a construction permit.
✔ Employment status is not a barrier – The following categories can apply:
Permanently employed individuals
Fixed-term employees (with a financially capable guarantor)
Self-employed entrepreneurs and farmers
Unemployed individuals (with a financially capable guarantor)
✔ No existing housing loan – This program is only available to those who do not have an existing mortgage.
What Are the Loan Terms?
✅ 1% Minimum Down Payment – Instead of the standard 20%, borrowers under this program are required to pay only 1% of the property value.
✅ Maximum Loan Amount of €100,000 – The state subsidizes loans up to this amount, but there are no restrictions on the total property price.
✅ One-Year Grace Period – Banks are required to offer a one-year payment pause at the beginning of the loan.
✅ Interest Subsidy for the First Six Years –
First year: Fixed 1.5% interest rate, with the state subsidizing an additional 2%.
Years two to six: The same interest rate and subsidy apply.
After six years: The interest rate becomes variable, calculated based on 3M/6M Euribor + 2%.
✅ Repayment Period Up to 40 Years – The maximum repayment term allows for lower monthly payments, but the last installment must be paid by the time the borrower reaches 70 years of age.
Limitations and Rules of the Subsidized Loan Program
❌ Restrictions on Renting and Selling the Property –
Buyers must live in the property and cannot rent or sell it for the first six years.
The government will conduct checks to ensure that the property is used for housing and not for resale or rental profit.
❌ The Property Cannot Be Purchased from a Close Relative –
The subsidy cannot be used to purchase a property owned by a spouse, parent, grandparent, sibling, or other close relatives.
Violating this rule may result in the loss of the subsidy and the obligation to repay the received funds with interest.
Advantages and Disadvantages of the Subsidized Loan
✅ Advantages
✔ Lower initial costs – Buyers save on upfront costs when purchasing a property.
✔ Government assistance in loan repayment – Subsidized interest rates for the first six years.
✔ Long-term financial planning – The 40-year loan term allows for lower monthly payments.
✔ One-year grace period – A payment break before the repayment begins.
❌ Disadvantages and Risks
❌ Variable interest rate after six years – Once the subsidy ends, the interest rate is Euribor + 2%, which could increase monthly payments significantly.
❌ Limited choice of properties – Buyers looking for homes within the €100,000 price range may have fewer options in terms of size or central locations.
❌ Restriction on renting and selling – Buyers cannot rent or sell the property for six years.
❌ Limited government budget – The subsidy program is not unlimited, meaning funding may run out quickly.
How Will This Program Affect the Real Estate Market?
Increased demand for properties up to €100,000 – Prices in this segment are expected to rise due to higher buyer interest.
Reduced availability of subsidies – The program’s budget is €400 million, which means that not all interested buyers will qualify.
Growth of suburban areas – Buyers seeking larger apartments or houses will likely opt for properties outside city centers.
Would you like to take advantage of this program and find your ideal home? Contact us today for more information!
