Centralized mortgage lending meets only 5% of the actual demand

The housing question today is , without exaggeration, one of the pressing issues for society, in the solution of which the state is trying to participate actively, including through centralized mortgage lending launched in 2006.

But how much has the state succeeded in this quest? According to the authorized banks of the Azerbaijan Mortgage Fund (AMF), in 2013 credits were issued for 112.9 million manats , which is 50 % more than in 2012 and a record since 2006. The average lending rate in 2013 decreased by 0.12 percentage points to 6.88 %. For all-time AIF extended loans to 532 million manat.

At first glance, these figures add up pretty rosy picture . But do these figures reflect the true demand in this market?

Commenting Turan this question , the expert of the Center Economic Initiatives Samir Aliyev , said that according to official figures last year about 80 thousand new families were created and to the most conservative estimates half of them have a problem with housing. If we add those that for several years have rented housing, the number will increase to 50 thousand people .

Annually centralized mortgage lending can be used by a maximum of 2.5 thousand persons and the annual lending is only 5 % of the actual demand.

Much more serious problems lie in the loan terms themselves . In this chain of sufficiently high rate of 8% conventional mortgage does not seem so significant compared with the requirement of authorized banks for initial payment that sometimes reaches 40-50 percent of the acquired property. Though , by the standards of the same fund for social mortgage, the figure is 15% and for conventional mortgage it is 20%.

Today there is an urgent need to improve the state-run mortgage program , including the establishment of the German circuit construction and savings banks, where customers accumulate funds over time and get access to mortgages, social housing, and increased funding, the expert said.

Chairman of the Center for Economic and Social Development Vugar Bayramli also confirmed the need to increase annual funding. According to him, based on the capabilities of the state budget , the amount of funds allocated for social mortgage must be at least three times more than the current sum. Also to be desired are credit conditions. On the basis of 8% for conventional mortgages, a client, who has taken a loan of AZN 50,000 for 25 years, is eventually overcharged by 70 thousand manats more, while in the first three years, he pays mostly interest. That is, every year, even if he has economic opportunities for early loan repayment, it becomes unprofitable, Bayramly added.

Centralized mortgage lending started in Azerbaijan in March 2006 , but in June 2007 due to lack of funds it was suspended until the summer of 2009. After that, the state began to finance social mortgage, and for the needs of that 40 million manat was allocated from the budge tof 2013. This year's funding will be the same.

Regular mortgages are financed through the issuance of bonds by AMF. For these purposes, in 2009-2013, the Mortgage Fund placed seven emissions by 55 million AZN, 75 million AZN, 60 million AZN, 20 million AZN, 30 million AZN, 40 million AZN and 20 million AZN. Late last month, the state registration recorded a new issue of 40 million manat.

AMF agents are 28 local banks. Mortgage loans are issued to citizens of Azerbaijan up to 50,000 manat for up to 25 years at a rate no higher than 8 % per annum. Concessional loans are up to 50,000 manat for up to 30 years at a rate of 4% per annum. - 15B -