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Developers and financial institutions must work closely together

Winner of the latest LuxReal Awards in the ‘Lenders & Bankers’ category, Tom Lessel shares his optimistic vision for the Luxembourg real estate sector in 2025.  He emphasizes the importance of strengthening adaptability to face rising regulatory challenges and ensure growth.

Tom Lessel
Deputy Head of Corporate Banking & Head of Real Estate – BIL
Executive Board Member – LuxReal

"Looking ahead to 2025, I am optimistic about the direction of the Luxembourg real estate market. Activity in the secondary market has picked up significantly, with transaction levels and prices stabilizing. However, challenges remain in the VEFA (sales in future state of completion) segment, which has yet to fully recover.

The combination of government incentives, stabilizing interest rates, and increased buyer confidence gives us reason to believe that a broader recovery is on the horizon. The demand for sustainable and energy-efficient projects will continue to grow. The focus is also shifting toward residential developments that offer affordability and practicality without compromising quality.

Our role is to bridge the gap between buyers and developers by offering flexible financing solutions and fostering trust in the process

The primary challenge we face as lenders is balancing regulatory requirements with the need to support buyers and developers effectively. The upcoming CRR3 regulations, which impose stricter capital requirements, may limit credit availability for some projects, particularly in the development sector. At the same time, the environment presents opportunities: lower interest rates, government measures to boost the market, and tools like Aides.lu and Charte.lu are fostering transparency and rebuilding confidence in VEFA developments. Our role is to bridge the gap between buyers and developers by offering flexible financing solutions and fostering trust in the process.

Adapt to meet the rising demand for sustainable housing

The real estate sector must adapt to a rapidly changing regulatory and economic environment. The introduction of CRR3 will require banks to reassess lending practices, particularly for construction and development projects. Developers and financial institutions must work closely together to address these challenges while also meeting the rising demand for sustainable housing. I believe the key to navigating these changes lies in innovation, transparency, and collaboration. Adopting new technologies, promoting green financing solutions, and adhering to quality standards like those in the Charte de Qualité Développeurs will help rebuild trust and ensure the market’s stability.

The Luxembourg real estate sector has always demonstrated resilience. By embracing long-term strategies and prioritizing sustainable growth, the Luxembourg real estate sector can turn today’s challenges into tomorrow’s opportunities. I am confident that through innovation, collaboration, and resilience, we will build a thriving future for all stakeholders."