Reporting of the attribute “purpose” to AnaCredit in the case of investments related to the financing of real estate properties

Question

What is reported in cases concerning the financing of an investment in real estate where the objective is to rebuild the property, including changing the building’s external dimensions (length, width, height, etc.)?

Should the activity be treated as “construction investment” or should it be considered as a refurbishment and consequently reported as either “residential real estate purchase” or “commercial real estate purchase”?

Answer

According to Section 3.4.14 of Part II of the AnaCredit Reporting Manual, “… the value ‘residential real estate purchase’ is reported for instruments extended for the purpose of purchasing residential property or investing in residential property, including buildings and refurbishments thereof”. Additionally, “… refurbishment of existing residential real estate is included under this category” (i.e. “residential real estate purchase”).

The Manual explains that, in contrast, loans to construction companies for the building of residential properties are to be treated as “construction investment” rather than “residential real estate purchase”. Moreover Section 3.4.14 of Part II of the Manual clarifies that construction investments constitute financing for the purpose of construction, meaning that the physical object does not exist at the time of financing. Therefore, it differs from the categories of “residential / commercial real estate purchase”, which refer to the acquisition/refurbishment of real estate that already exists.

Hence, any refurbishment of existing real estate, including changes to the external dimensions of the property, are reported as either “residential real estate purchase” or “commercial real estate purchase” in line with the clarifications provided in Section 3.4.14 of Part II of the AnaCredit Reporting Manual.

Related questions

See also Residential real estate purchase and unoccupied real estate

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