AIB launches €500m fund designed to deliver up to 1,000 new apartments every year

The Irish Apartment Development Fund (IADF) will provide debt capital to drive the development of apartment and student accommodation. The fund already has several new projects under consideration and is set to focus on Dublin, Cork, Galway, and Limerick.

Cathy Bryce, chief executive of AIB Capital Markets, said developers securing funding was one of the challenges to new homes being built in Ireland.

“The purpose of IADF is to increase the availability and flexibility of funding options for the developers of apartment and student accommodation, and in this context we are delighted to work with Activate Capital to help accelerate housing delivery,” she said.

“This shows our ongoing commitment to find meaningful solutions to help the sector.

“We are confident that IADF can be an important contributor to future apartment development finance needs, and at full deployment, IADF can deliver around 1,000 homes per annum. IADF is already up and running and we are inviting submissions from developers for the fund immediately.”

The fund comes weeks after economists at the Central Bank predicted new home completions would rise to 35,000 this year and increase further in 2025 and 2026. Achieving such figures would bring delivery in line with current government targets but short of where many experts assess demand.

AIB has previously allocated €800m in funding to support social housing by the end of 2024

Bryce noted the outlook on housing completions had improved, but that headwinds still existed as demand outweighed supply.

She also acknowledged challenges in other segments of the property market. However, Bryce said AIB had maintained a positive growth outlook for residential development.

The IADF will be managed by Activate, which is backed by global asset manager KKR, and will promote mixed-tenure developments. This will include for owner-occupiers, private-sector rental, cost rental and social housing.

Robert Gallagher, CEO of Activate Capital, said its shareholder KKR was committing capital to Ireland through the fund.

“We now look forward to deploying the capital at pace in 2024,” he said.

Activate was founded in 2015 and has a longstanding partnership with The Ireland Strategic Investment Fund. It is one of the State’s leading providers of real-estate development finance, having advanced loans of €1.9bn across 75 sites with the capacity to deliver over 18,250 homes.

AIB has previously allocated €800m in funding to support social housing by the end of 2024. The bank said most of this fund had been allocated to date.

The regular Housing Market Monitor from the Banking & Payments Federation Ireland (BPFI) also recently revealed that apartment completions had jumped 28pc to more than 11,600 units last year.

Bryce warned however that headwinds still existed as demand outweighed supply

However, the BPFI note warned of waning interest from institutional investors in financing apartments, meaning state funding would be needed to underpin future supply.

Overall, 32,695 new dwelling completions were recorded in 2023, a 55pc rise from 2019.