* 4 bln euro net loss in 2008 vs 74 million proift in 2007
* Provisions 1.97 billion euros for falling asset values
* 2.37 billion loss against assets trying to sell
* Frozen market precipitates 70 percent fall in asset sales
* Cuts debt with bond issue, sale of non-strategic assets
MADRID, March 2 (Reuters) - Colonial posted a net loss in 2008 of nearly 4 billion euros ($5 billion), hammered by a Spanish property market that has been paralysed by falling property values and a credit freeze for buyers.
The Spanish property developer had a net loss of 3.98 billion euros compared to a net profit of 74.1 million euros in 2007, hit by writedowns on the falling value of its assets, fewer building sales and discounted contributions from assets it has put up for sale.
The results are the first figures to show the impact on Colonial of Spain's frozen property market, where commercial property assets have become difficult to sell.
Colonial said over the weekend that it provisioned 1.97 billion euros against the falling value of its buildings, such as office space in Madrid, Barcelona and Paris.
The company also said it showed a loss of 2.37 billion euros for its stakes in FCC France's Societe Fonciere Lyonnaise (SFL) , and its house sales business Riofisa as it is trying to sell them and counts them as discontinued operations.
Colonial said it cut its net debt by 1.6 billion euros to 7.3 billion euros in the final three months of the year by issuing 1.3 billion euros in bonds and selling non-strategic assets.
The company said that in January, it cut its debt by a further 700 million euros after creditors signed debt-for-equity deals to buy up much of Colonial's holdings in building firm FCC and SFL.
Colonial shares were flat at a year low of 13 cents by 1201 GMT, having fallen from 1.6 euros a year ago.
Colonial's core business was hurt by a severe shortfall in credit for both commercial property investors and home buyers.
Sales rental assets fell 70 percent to 166 million euros as the credit crunch took hold and the market for offices and commercial space dried up.
The company, in which its creditor banks have taken a 24 percent stake in return for the cancellation of debt, said rental income fell 4 percent to 289 million euros.
Sales of developments and land fell 19 percent to 402 million euros, contributing to a 10 percent fall in operating profit, or earnings before interest and taxes (EBIT), before provisions, to 227 million euros.
Colonial said the gross value of its assets was 8.93 billion euros for the year versus 11.6 billion for 2007.
Its net net asset value (NNAV) per share fell 66 percent to 0.24 euros year on year. ($1=.7940 euros) (Reporting by Ben Harding; editing by Karen Foster)