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Nama Problems...

NAMA ‘won’t solve developer problems’...

THE property, development and construction sectors will not be served by a functioning bank post-NAMA, unless the proposed legislation is amended to provide access to sufficient working capital for new and viable projects, the Construction Industry Federation has said.

Following a meeting of the Construction Industry Federation (CIF) members yesterday director general Tom Parlon outlined serious reservations they have with the whole NAMA scheme.

"The entire NAMA project is predicated on the need to get liquidity flowing again to support the normal economic life of the country, protect jobs and give people a renewed sense of confidence in our collective futures.

"As more details emerge, however, there is a growing sense that NAMA could have the opposite effect by essentially freezing working capital for construction employers and adding to the sense of uncertainty and paralysis that has permeated all aspects of the economy since April’s announcement."

Mr Parlon specifically identified the decision toreduce NAMA’s working capital fund from €10bn to €5bn as a major obstacle to securing the future success of pipeline projects.

"The decision to reduce the figure appears to have been made without the benefit of any evidence whatsoever as to the anticipated working capital requirements of NAMA. In the first instance, working capital is vital in terms of NAMA’s ability to add value to loan portfolios in order to maximise the returns to the Exchequer. It is equally vital in terms of the level ofactivity and output in construction and for the nearly 200,000 employees in the industry."
Mr Parlon said there were risks for distortions in the market arising from NAMA’s monopoly position, and the likelihood for unintended adverse consequences for all property owners and the wider economy resulting from the introduction of an 80% capital gains tax rate in relation to land transactions.
Mr Parlon said the construction sector will be left without commercial banking support post-NAMA.

"The CIF is seriously concerned that NAMA will not act as a functioning bank, which will leave reputable, sound businesses without commercial banking support. The suggestion that the banks will fill this void is ill conceived. Banks will only participate in lending on the basis that they get adequate security/equity in a particular project.

"As NAMA will control all securities and equity, existing experienced borrowers will be excluded from trading in the property and development marketplace.

"This will restrict the market to capital funds and syndicates of non development/construction professionals, which from the construction industry’s perspective contributed in no small measure to the difficulties in which we now find ourselves," Mr Parlon argued.

The CIF boss said this represents a major threat to Ireland’s economic recovery prospects and future sustainable prosperity at a time when international best practice shows us that investment in construction offers the most immediate and effective way of tackling rising unemployment, and is vital in terms of growing the productive capacity of economies.



Reoport - Irish Examiner

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