KfW or BAFA? Which funding programme fits which renovation

You have decided to renovate and immediately come across two names: KfW and BAFA. Both fund energy-efficient renovation, both belong to the Federal Funding for Efficient Buildings (Bundesförderung für effiziente Gebäude, BEG) — and yet the question “where do I apply?” is no mere formality. This article is written for owners of a residential building who are about to place their first order and want to know which application goes where.

The article first draws the map: which body funds which building element. Then the second fork in the road — individual measure or efficiency house. Then the sequence of advice, contract and application, the evidence required, the limits on combining funding and, finally, the tax route for everyone who does not want to file an application.

#Who funds what — KfW or BAFA?

The division follows no administrative logic, but the building element. Everything concerning the heat generator goes through the Kreditanstalt für Wiederaufbau (KfW), the federal development bank. Everything on the building envelope and building services other than heating goes through the Federal Office for Economic Affairs and Export Control (Bundesamt für Wirtschaft und Ausfuhrkontrolle, BAFA). And the advice that precedes both is a pot of its own — also with the BAFA.

Anyone planning both therefore files two applications with two bodies, with two deadlines and two sets of evidence. This is the point at which most schedules fall apart. How a renovation fits together technically and in which order it makes sense is covered in Energy-efficient renovation and funding 2026 — here the subject is the administrative route.

One basic rule stands above everything and is regularly overlooked: § 89 (1) no. 4 of the Building Modernisation Act (Gebäudemodernisierungsgesetz, GModG) ties the funding to the condition that the funded measure exceeds the statutory requirements.1 Anyone who merely meets the minimum of Annex 7 has complied with the Act and is still not entitled to any money. The relevant values are set out in the technical minimum requirements of the programmes, not in the Act.

#Individual measure or efficiency house — what is the difference?

This is the second fork in the road, and it decides the amount of funding, the effort and the evidence.

An individual measure (Einzelmaßnahme) is exactly that: one building element, one system, one grant. You insulate the roof, replace the heating, renew the windows — each on its own, each with its own application, each with its own funding rate. The advantage is flexibility: you renovate at the pace your budget allows and do not have to prove anything beyond the individual element.

An efficiency house renovation (Effizienzhaus-Sanierung), by contrast, assesses the whole building after the measure. It calculates against a reference building, it requires overall energy planning, and it is funded not as a grant but as a low-interest loan with a repayment grant (Tilgungszuschuss) — programme 261, maximum funding amount 150,000 euros per residential unit.2 There is no longer a grant variant for this: the former programme 461 no longer accepts applications and itself refers to the loan.9 What levels 85, 70, 55 and 40 mean and which repayment grant is attached to which is covered in a separate article.

The choice is not a matter of style but binding for years: combining the two routes is ruled out, and after completion of a project funded through the efficiency house scheme, an application for individual measures is only possible again after three years — and the same applies the other way round.2 Anyone who has an individual measure funded in the first step has therefore blocked the route to an efficiency house renovation for three years.

The assessment basis for individual measures is staggered by residential unit: 30,000 euros for the first, 15,000 euros each for the second to sixth and 8,000 euros each from the seventh. If a funded individual renovation roadmap (individueller Sanierungsfahrplan, iSFP) is in place, these limits rise to 60,000, 30,000 and 15,000 euros.4 What is capped is therefore not the grant, but the sum to which the funding rate is applied — what the renovation roadmap brings beyond that is explained in iSFP: What the individual renovation roadmap brings.

#What does the advice cost — and why does it come first?

Because two of the three routes cannot be taken without it at all. For individual measures on the envelope and building services, the BAFA requires the involvement of an energy efficiency expert (Energieeffizienz-Experte) from the federal expert list;46 for the efficiency house renovation, the same expert produces the confirmation for the application, without which the KfW will not accept the application.2 Only for a heating replacement is the confirmation of the specialist firm carrying out the work sufficient.

The advice itself is funded: the federal funding for energy advice for residential buildings covers 50 per cent of the eligible fee, up to a maximum of 650 euros for one- and two-family houses and up to a maximum of 850 euros for buildings with three or more residential units.5 One of the conditions is that the building application or building notification was made at least ten years ago.

Within the efficiency house scheme there is also a separate pot for specialist planning and construction supervision: up to 10,000 euros per project for one- and two-family houses, for apartment buildings 4,000 euros per residential unit and at most 40,000 euros per project; the repayment grant on this is 50 per cent.2

#In what order do you apply?

This is where the most expensive mistake in the entire funding landscape lies, and it has a name: project start (Vorhabenbeginn).

Project start already means the conclusion of a supply or service contract attributable to the execution of the work — not the first turn of the spade, not the first invoice.2 Anyone who signs the contract with the tradesperson and applies afterwards has lost the funding for this measure, completely and without leniency.

The way out is a contract clause: the contract is concluded subject to the condition precedent or condition subsequent of the funding approval. Then there is no project start. For a heating replacement, a contract with such a condition is even part of the application — it is uploaded together with the confirmation.3

#What may be combined — and what may not?

Three limits, and all three are breached in practice.

First, the funding rate. If all public funds taken together — state programmes, municipal grants, other federal funds — result in a rate of more than 60 per cent for the same measure, this must be reported to the KfW; the BEG funding is then reduced so that 60 per cent is reached, and amounts already paid out must be repaid.2 Interest subsidies on funding loans and public guarantees are not counted.

Second, the same measure twice. A building element is funded once. Anyone who has the façade funded as an individual measure cannot additionally include it in the efficiency house balance of the same renovation.

Third, grant and tax reduction. § 35c (3) of the Income Tax Act (Einkommensteuergesetz) denies the tax reduction if low-interest loans or tax-free grants are claimed for the same measure.7 The KfW information sheet draws the line even more tightly: excluded for the same measure, neither at the same time nor at a later time, are the tax reduction under § 35c and the deduction for tradesperson services under § 35a (3) of the Income Tax Act — “not even as a split into material costs and labour”.2 The widespread advice to have the material share funded and deduct the labour share for tax therefore does not hold. You decide per measure — not per building and not per year.

Also ruled out is claiming, for the same costs, the programmes “Altersgerecht Umbauen” (age-appropriate conversion, 159), “Barrierereduzierung” (barrier reduction, 455-B) and “Einbruchschutz” (burglary protection, 455-E) at the same time.2 Anyone making the home barrier-free in the same go separates the invoices cleanly by trade — otherwise one of the two funding streams falls away.

#What applies to apartment buildings and owners’ associations?

Besides private individuals, companies, sole traders, partnerships, legal entities under private law and housing cooperatives are also eligible to apply.2 A special rule applies to owners’ associations (Wohnungseigentümergemeinschaften): measures on common property are applied for by the association, measures on separate property by the individual owner. The dividing line is the same as in the law on residential property — the façade belongs to everyone, the inside of the flat’s front door not necessarily.

Two points regularly cause delays at owners’ meetings. First: the assessment limits for individual measures count per residential unit, not per building — a house with eight flats therefore reaches a considerably higher assessment basis than eight terraced houses with one each. Second: the resolution must be passed before the contract is concluded, and the application must be submitted before the contract. Anyone who chooses the order resolution – contract – application has lost the funding.

If the applicant is not the owner of the building — a leaseholder or a holder of a heritable building right, for example — they are only eligible if the owner is also eligible and was informed before the application about the use of the funding and the amount of the maximum funding.2

Why the energy performance certificate counts for a lot in this constellation: it is issued for the building, not for the individual flat — and thus becomes the common basis of figures for the whole association. The details are covered in Energy performance certificate for an owner-occupied flat.

#What if you do not want to file an application at all?

Then the tax route remains. For energy-related measures on an owner-occupied building that is more than ten years old when the work is carried out, income tax is reduced in the year of completion and in the following year by 7 per cent of the expenditure each, at most 14,000 euros each, and in the third year by 6 per cent, at most 12,000 euros; for the costs of an energy consultant it is 50 per cent.7

The route has three advantages: no application before the contract, no deadline, no expert as an obligation. It has three disadvantages: it applies only to owner-occupiers, it requires a certificate from the specialist firm and cashless payment, and it is spread over three years. And it is time-limited — eligible are measures completed before 1 January 2030.

For landlords it is not an option; for them, energy-related expenditure is maintenance or production cost, and the distinction belongs in the tax return, not in a funding application. What the energy performance certificate itself means for tax purposes is covered in Is the energy performance certificate tax-deductible?.

#Frequently asked questions about KfW and BAFA

#Conclusion: clarify the body first, then sign the contract

The map is simpler than it looks: heating to the KfW, envelope and building services to the BAFA, the whole house via loan 261 — and the advice beforehand is funded by the BAFA. The difficulty is not the allocation but the sequence: every application has to be submitted before the project starts, and the project starts with the unconditional contract with the tradesperson. Anyone who writes this one clause into every quote has avoided the most common and most expensive mistake in funding practice.