A landmark agreement was signed on Wednesday at Limassol town hall, marking a step in tackling the city’s housing crisis.

After nearly two years of negotiations and a total of five years of planning, the municipality of Limassol and the Cyprus land development corporation (Koag) have reached a deal to deliver hundreds of affordable flats to local families.

The plan, years in the making, will see the municipality offer four plots of land to Koag, which will oversee construction. The long-term goal is to build 600 homes across the city. The land-for-build deal has been finalised with Koag receiving 68.25 per cent of the properties and the municipality the remaining 31.75 per cent. The agreement has been approved by both the land registry and the state aid commissioner.

The first phase of the project will begin in the Ayios Nikolaos district, with 138 flats planned in four apartment blocks. The total budget stands at €26 million, with €10 million from Koag and €16 million from state funding. Construction of the first block, a six-storey building with 36 flats, has already been awarded to a contractor, with work expected to begin as soon as the agreement is ratified.

This first block will take 18 months to complete. Once ready, the project will move straight into the second stage of the Ayios Nikolaos site, with the remaining three blocks expected to take 30 months. All flats in this development will be offered at rental prices at least 30 per cent below the market average.

The housing project will include a mix of apartment sizes: 24 one-bedroom, 72 two-bedroom, 36 three-bedroom, and six four-bedroom homes. Distribution between the municipality and Koag will be based on floor area, in line with the agreed percentages.

The deal has also benefited from strong state support. At a public event on Saturday attended by the president, the finance minister pledged €3 million to the Limassol municipality to cover tax costs associated with the project. This funding was seen as essential to keep the project alive. Koag will still need to pay VAT worth roughly €3 million on the construction costs.

Meanwhile, preparations are already underway for the next stage of the programme. According to a Politis report, planning permission is expected soon for another site in Ayios Ioannis. This second phase will add 180 flats across six new buildings. However, further progress hinges on additional government funding, as Koag currently lacks the financial means to proceed alone.

Should that funding be secured, both the municipality and Koag are expected to apply the same partnership model used in Ayios Nikolaos to move the Ayios Ioannis project forward. Phase three of the broader plan is the most ambitious yet, aiming to construct nine more buildings in Ayios Nikolaos with 280 flats in total.