Maori who want to move back to ancestral land will now be able to get a $200,000 loan from Kiwibank, with no deposit, to build or buy a home.
However, houses will have to be built on wood piles and be in either the North or South Island so the bank can take them back if the borrowers default.
Housing Minister Phil Heatley announced the partnership between Housing New Zealand and Kiwibank on Wednesday morning. The Crown would guarantee the loans under the Kainga Whenua scheme. Generally loans would be capped at $200,000 but in some cases, in more expensive areas including parts of Auckland, Wellington and Queenstown, greater limits up to $350,000 would be able to be negotiated.
Multiple land owners would have to agree to a family using the scheme. Other requirements included a valuation from a registered valuer, a satisfactory building contract, and income and credit provisions.
The loans would be available to first home buyers, but there were exceptions for those who previously owned a home but were in the same financial position as a first home buyer.
Borrowers' income would be below $85,000 or below $120,000 for three borrowers in a single household.
The average expected price of a house is $175,000. In rural areas that would include septic tanks, but Heatley said there was a surprising amount of Maori land in urban areas.
"Essentially banks haven't loaned on multiple-owned Maori land because they just don't have security," Heatley told reporters.
"Here's Maoridom who own an awful lot of land, it's got huge value and it seems absurd to me that if they own it they should be able to build on it if that's what they choose to do... Ultimately this is available to any Maori family who want to go back to their ancestral land."
He did not expect take-up of the 180 loans available this year to be big. Financial times were tough, it would take a while for the scheme to bed in and multiple owners needed to come to agreement.
Heatley said he had been lobbied for a long time by Maori who owned land they could not use and he would be talking to some local councils this year about zoning rules that stopped more than one house being built in rural areas.
Kiwibank board chairman Jim Bolger said the scheme was overdue but now was the time.
"What we've done is broken through a barrier," he said.
"We have to resolve some of these issues if we are going to meet the needs of Maori New Zealanders. The land is held in different title and will continue to be held in different title. The non-divisibility of some of this land is permanent so we either say we can't use that land or we find ways of using it."
Houses built had to be re-locatable in case of default but HNZ chief executive Lesley McTurk said that was unlikely to happen.
"We anticipate a huge level of cooperation within Maoridom to make this a success."
She expected if one family could not make payments the iwi could put another family up to take over the debt.
Bolger said the Welcome Home loan had been very successful with few problems and he said world-wide such schemes worked well.
"The commitment from people in this category is much higher to succeed."
Heatley said the Maori Party had pushed for the pre-election pledge to be implemented.
Maori Party co-leader Tariana Turia welcomed the announcement.
"We know that most Maori have a strong desire to own their own homes, but barriers such as low incomes, poor access to finance or inconsistent and uncoordinated policy responses have not aligned with Maori housing aspirations," she said.