The Department of Education is among the government agencies that have met Nama to outline their interest in acquiring land for schools, government sources have told the Sunday Tribune.

The department plans to spend millions on sites in the coming years, despite this newspaper having revealed that it overspent by up to €170m on land for schools between 2005 and 2009.

The HSE and the Department of the Environment have also met Nama to outline future property needs, the sources said, but specific sites have not been identified at this stage by the three bodies as Nama has not yet seized the land.

The first land auctions by Nama are expected to happen early next year and, under the loan agency's business plan, that land will first be offered at the minimum reserve price to government entities before being put on the open market.

However, reports that the HSE might be interested in converting some struggling hotels into nursing homes are incorrect because the conversion costs are too high, particularly on the mechanical and engineering side.

Instead, industry sources say Nama is playing "a game of chicken" with Bank of Scotland Ireland and Ulster Bank, which are the main lenders in the hotel market.

The two British-owned lenders are hoping to hold out and offload the loans at a later date, they said, but Nama has decided that the 60-plus hotels whose loans it has acquired will have to make themselves sustainable and not rely on it for funding if they are loss-making.

The hotels have begun the cost-stripping process and are bringing in specialists to help identify efficiencies, sources said.

They believe that if that model is sustainable then Nama will look at setting up a real estate investment trust (REIT), similar to the one planned for apartments and houses taken over by the bad loans agency. That allows investors and members of the public to invest in the sector without facing double taxation. However, REITs are not expected to be introduced in Ireland for 18 months to two years.

Contrary to popular belief, there are very few five-star hotels in Nama; most are what the industry calls "meat and two veg" hotels in the three- and four-star categories.

Hotel sources said many of the difficulties the hotel sector is facing are limited to local factors. As a general rule, hotels on the coast are trading at strong levels but there is an obvious oversupply in Limerick and serious problems with hotels located through the spine of the country.

In Dublin, one hotel group in particular is being blamed for dragging down average room rates.