IFRS 9 · Real Estate

IFRS 9 ECL Calculator
for Real Estate

Pre-configured for property entities with tenant receivable defaults, security deposit offsets, service charge receivables, and property market forward-looking indicators.

Benchmark rates loaded. These are illustrative only. Replace with entity-specific historical loss data for IFRS 9 compliance.

Provision Matrix

Define aging buckets, enter gross carrying amounts and historical loss rates. Per IFRS 9.B5.5.35.

Forward-Looking Adjustment

Required by IFRS 9.5.5.17. Purely historical rates are not IFRS 9 compliant.

Advanced Features

Optional: probability-weighted scenarios, movement schedule, specific assessment, and entity details.

IFRS 9 ECL Audit Working Paper Template — free PDF

Practical audit guide covering the simplified approach provision matrix methodology, forward-looking adjustment documentation template, probability-weighted scenario framework, IFRS 7.35H movement schedule template, common ISA 540 findings on ECL estimates, and industry benchmark loss rates for 12 sectors.

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IFRS 9 Expected Credit Losses for Real Estate

Real estate and property companies carry trade receivables that primarily arise from tenant rental obligations, service charge billing, and property development milestones. Under IFRS 9, these receivables require ECL assessment using the simplified approach. The credit risk profile of real estate receivables is closely tied to the property market cycle and the financial health of tenants. Property companies face a unique consideration: security deposits held from tenants provide economic protection against tenant default, but IFRS 9 requires the ECL to be calculated on the gross receivable balance before considering the deposit. The deposit is a separate asset/liability arrangement and does not reduce the IFRS 9 measurement. However, for disclosure and audit assessment purposes, the net exposure after deposits provides useful context for evaluating the reasonableness of the ECL estimate.

Receivable Characteristics — Real Estate

Tenant rental receivables form the largest category for investment property companies and are typically billed monthly or quarterly in advance. Service charge receivables are billed separately and may carry slightly higher credit risk because tenants sometimes dispute service charge amounts. Property development receivables from buyers of residential or commercial units under construction represent milestone-based payments that carry completion risk in addition to credit risk. Lease incentive receivables (where the landlord has provided fit-out contributions that are recoverable through higher rent) are long-term receivables that require careful IFRS 9 treatment. For property companies with mixed-use portfolios, different tenant segments (residential, commercial, retail) may require separate provision matrix groupings due to materially different credit risk profiles.

Forward-Looking Factors

Property market indicators are the primary forward-looking data sources for real estate ECL estimates. Vacancy rates directly correlate with tenant default risk — rising vacancy signals weakening demand and potential tenant financial stress. Commercial property price indices affect the collateral value (relevant for development receivables) and the broader market sentiment. Interest rate environments affect tenant financing costs and may influence payment behaviour. For residential property, unemployment rates and household income growth are the most relevant indicators. For commercial property, business confidence indices and sector-specific employment data matter more.

Key forward-looking indicators for real estate:

  • Property market vacancy rates
  • Commercial real estate price indices
  • Rental yield trends
  • Interest rate environment (mortgage/financing costs)
  • Economic growth forecasts (tenant creditworthiness)
  • Construction activity indicators

Regulatory and Audit Context

Real estate entity ECL estimates are audited with particular attention to the segmentation of the receivable portfolio. Auditors should evaluate whether management has appropriately grouped tenants by risk characteristics — a single provision matrix applied to a mixed residential/commercial/retail portfolio may not adequately capture the different risk profiles. Security deposit offset arrangements should be documented but not used to reduce the gross ECL. For property companies that also provide financing to buyers (vendor financing), those loan receivables fall under the IFRS 9 general model, not the simplified approach. Common audit findings include: insufficient segmentation of tenant types, failure to consider security deposits as a separate arrangement, and inadequate forward-looking adjustments during property market downturns.

Property companies that provide vendor financing to buyers must use the IFRS 9 general model (not the simplified approach) for those loan receivables, which are lending arrangements rather than trade receivables.

Worked Example — MetroProperty REIT

MetroProperty REIT manages a €280M commercial property portfolio with 85 tenants. Trade receivables of €3.1M comprise rental receivables (€2.4M) and service charge receivables (€0.7M). Security deposits held total €1.8M. The FL factor of 1.10× reflects rising vacancy rates in the commercial office market segment and expected interest rate increases affecting tenant financing costs.

Bucket Amount Rate ECL
Not yet due €1.800.000 0.33% €5.940
1–30 days €600.000 0.88% €5.280
31–60 days €350.000 2.75% €9.625
61–90 days €180.000 7.70% €13.860
91–180 days €120.000 19.80% €23.760
180+ days €50.000 49.50% €24.750
Total €3.100.000 €83.215

Forward-looking adjustment factor: 1.1× applied to all buckets. Rates shown above are adjusted rates (historical × FL factor).

Typical receivable profile: Real estate receivables include tenant rental receivables, service charge receivables, property development stage payments, and lease incentive receivables. Security deposits held from tenants may reduce the net credit exposure but do not eliminate the need for gross ECL assessment on the receivable balance.

Frequently Asked Questions — Real Estate

Should security deposits be deducted from receivables before calculating ECL?
No. IFRS 9 requires the ECL to be calculated on the gross carrying amount of the receivable, without netting security deposits. Security deposits are a separate financial liability (or collateral arrangement) that provides economic protection against default but does not reduce the IFRS 9 measurement. However, for disclosure purposes and as a reasonableness check, the net exposure after deposits provides useful context.
How should different tenant types be segmented for the provision matrix?
IFRS 9 requires receivables to be grouped by shared credit risk characteristics. For property companies with mixed portfolios, this typically means separate groupings for: residential tenants (higher volume, lower individual amounts), commercial office tenants (moderate volume, moderate amounts), retail tenants (affected by consumer spending cycles), and government/institutional tenants (typically low credit risk). The loss rates for each segment should be based on historical loss experience for that specific segment.
Do service charge receivables require separate ECL assessment?
Service charge receivables have a different credit risk profile from rental receivables because tenants are more likely to dispute service charge amounts (especially reconciliation balances). While they can be included in the same provision matrix, the loss rates may differ. A practical approach is to include service charge receivables in the same aging analysis but apply a slightly higher loss rate to reflect the dispute risk.
What forward-looking indicators are most relevant for property company ECL?
Vacancy rates are the single most relevant indicator — rising vacancy directly correlates with tenant financial stress and potential default. Other important indicators include commercial property price indices (affecting market sentiment and tenant alternatives), interest rate forecasts (affecting tenant financing costs), and sector-specific employment data for the industries represented in the tenant base. For residential property, unemployment rates and household income growth are most relevant.
How should property development milestone receivables be treated for ECL?
Development milestone receivables from property buyers represent a different risk profile from ongoing tenant rentals. These should be assessed separately, potentially using specific assessment for large individual amounts. The credit risk depends on the buyer's financial position and the property market conditions — in a declining market, buyers may default on milestone payments if the property value falls below the contracted price. Forward-looking adjustments should consider property price forecasts specific to the development location and type.

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