Income-Producing Real Estate (IPRE)

In the IRB Approach the credit institution must define the group of specialised lending activities within the “exposures to corporates” exposure class. Specialised lending may be split into five sub-groups in accordance with the Basel Accord, of which one is Income-Producing Real Estate (IPRE). A special feature of IPRE is that the repayment and proceeds of sale in the event of a default are based primarily on the revenues raised from the property. The main source of these payments are rental or leasing income or the sale of the property. This type of real estate financing differs from others, namely corporate financing securitised by liens on the property, exists in that in this instance there is a strong positive correlation between the settling of the claim and the proceeds of sale in the event of default, since both factors are primarily dependent on the ongoing revenues from a property.