Mortgage Lending to Grow by Four Times

The Azerbaijani government intends to maintain the pace of housing construction by extending mortgage loans.

President Ilham Aliyev at a meeting of the government on Monday announced the allocation until the end of the year of 200 million manats for concessional lending and commercial mortgages. It follows that mortgage lending will increase four times in 2015. At the end of 2014 it was expected that the volume of mortgages will be 50 million manats.

Aliyev called priority mortgage finance of new buildings, and especially of housing under construction.

The government caught preferences of the citizens. According to the central bank, in a total 29 percent reduction in the volume of sale and purchase of property last year, the secondary market decreased by 33.4% to 1,326,727,000 manats, and the primary market grew by 22.9% to 186,295,000 manats. According to the Azerbaijan Mortgage Fund, 93% of mortgage loans are related to the purchase of housing in high-rise residential buildings, and the rest - in individual homes.

Reduction in the operations on purchase of real estate was particularly noticeable after the 35% devaluation of the manat in February this year. Banks have stopped first mortgages, and then 12 of the 29 banks increased the size of down payment more than twofold - up to 40-50% for commercial lending and 30-40% for social crediting.

 Loans are granted for a period of 3 to 25 years, the maximum loan must not exceed 50,000 manats, a loan is granted at a rate of not more than 8% per annum. Social mortgage, the maximum size of which is 50,000 manats at a rate not exceeding 4% per annum, is financed from the state budget.

In 2014, loans through the Azerbaijan Mortgage Fund (AMF) were received by 2,240 citizens, just as of 1 January this year this opportunity was used by 15,842 people. According to the Fund, the share of social mortgage is 22.2% or 3,520 people (previous year - 1,135 credits). The rest of the loans are obtained on commercial terms. In most cases (37.9%), mortgage loans account for young people aged 18-29 years (37.9% of all mortgage loans), followed by the recipients of high wages (excluding beneficiaries) aged 30-35 years (33.1 %), and the rest - over 36 years - 29%. It was found that 32.8% of borrowers work in the public sector, 59.6% - in the private non-banking sector, 23.8% - in the financial and banking system, 13.8% - in the oil and gas sector. It is noteworthy that 79.6% of borrowers are the military.

Earlier, Finance Minister Samir Sharifov announced plans to increase the amount of the mortgage. "I think that the Central Bank will offer additional funds to strengthen the market and if it is necessary, the government will provide additional state guarantee," he said.

In turn, the Chairman of the Central Bank Elman Rustamov reported on preparation of a package of proposals which include increasing the amount of a mortgage loan for social and commercial mortgages, expansion of mortgage lending in the regions and others. -0-