The National Asset Management Agency (Nama) plans to impose discounts of between 25% and 33% on the most devalued loans contained among the €80bn of property assets to be transfered to the state-owned organisation.
Higher discounts will have major consequences for lenders to leading property developers, such as Liam Carroll, whose legal representatives on Friday applied for six of his companies to be put into the examinership.
The informed estimates for the discounts that Nama will likely apply are much higher than the 20% average some analysts have forecast to date.
The draft Nama legislation, which the government is preparing to publish in just over a week, is understood to stretch already to more than 200 sections, making it one of the longest bills of its type.
The government wants to safeguard it against legal challenges based on property rights enshrined in the constitution.
The draft "may or may not" give Nama the power to buy residential mortgage loans from the guaranteed Irish banks, as recommended recently by IMF experts, senior sources told the Sunday Tribune.
However, it is believed that Nama would never need to buy home loans because the Irish banks' mortgage books remain in reasonably good shape.
The legislation will give Nama a 10-year lifespan, and provide for full scrutiny by the Oireachtas after the first five years of its life, sources said.
It is envisaged that following an Oireachtas debate, Nama would be set up in November and have purchased, at a discount, the first €40bn of loans by Christmas.
Nama will buy property loans from AIB, Bank of Ireland, Anglo Irish, Irish Nationwide and EBS.
Under one version of the legislation, Permanent TSB will not be covered by Nama because it has an insignificant amount of commercial-property loans on its books.
After the publication of the legislation, speculation will heighten about the discount Nama will pay for the loans.
But experts indicated that estimates of the discount are too low.
A survey by Bloxham Stockbrokers last week found that many investors believed the discount would be more than 20%.
A higher level of discount would mean that Nama may even make money for taxpayers over its 10-year life.
A rebound in property prices in Britain, where at least €25bn of the €80bn loans are invested, would help Nama sell back some loans in less than a year, experts said.
Earlier this month, a survey by property analyst CBRE found British commercial-property prices fell by less than 1% in June, raising hopes for a quick recovery in values there.