The loans offer a similar return to the rental yields on acquired buildings and help Allianz to overcome a scarcity of prime real estate investment opportunities, Olivier Piani, chief executive officer of Allianz Real Estate, said.

Declining margins on assets traditionally considered safe, such as German or U.S. government bonds, have sent investors, including Allianz, rushing to put their money into property.

"Margins (on loans) were traditionally too low, but they have caught up so that lending against real estate is similar to buying real estate," Piani told Reuters.

Property in the most valuable locations - high-quality city centre buildings fully occupied by solvent tenants - offers margins of more than 5 percent, the Allianz manager said. This comfortably beats margins of about 1.5 percent on 10-year German government bonds.

Allianz's strategy is helped further by new European Union regulations that require banks to hold more equity in relation to their loan books to make them more stable in financial crises, leading them to lend less money.

"There is a natural gap," Piani said, "...as most banks have chosen to get rid of real estate lending."

By helping to fill that gap, Allianz intends to increase the group's exposure to real estate to 6 percent, from 4 percent, of its overall invested capital of 480 billion euros ($619 billion), Piani said.

Allianz will invest as much in loans as in property in the next five years, doubling its loan book to 11 billion euros and increasing its property portfolio to 25 billion euros, he said.

"The lending site is gearing up from a situation in the past where we invested more directly in real estate," he said.

Loans with a maturity of 10 years enable Allianz to match its long-term obligations to insurance policyholders and benefit from assets owned by its peers, thereby broadening the insurer's market.

Real estate companies, meanwhile, are happy to take up the new offerings from insurers, Arwed Fischer, chief financial officer of Patrizia Immobilien (P1ZGn.DE), told Reuters, adding that it can be easier dealing with insurers than with banks.

Fischer predicted that the sale of residential real estate would decline next year from between 10 billion and 11 billion euros in 2012, demonstrating the scarcity of real estate assets. ($1 = 0.7754 euros)

(Editing by David Goodman)

• A Permanent Economic Emergency