Azerbaijan’s Mortgage Market Developing Stably, Says Head of National Bank

Business Materials 26 November 2008 12:30 (UTC +04:00)

Azerbaijan, Baku, 26 November / Trend corr. N.Ismayilova/ The Azerbaijani mortgage market is developing stably under conditions of the world financial crisis, Elman Rustamov, the chairman of the Board of the National Bank of Azerbaijan (NBA), said.

"It is necessary to pay attention to lessons, which the world mortgage market has taught and to try not to repeat its mistakes," Rustamov said.

According to Rustamov, Azerbaijan can continue issuing mortgage loans under conditions of the crisis.

A total of AZN 14.5mln has been deposited in 2009 public budget to finance social mortgages.

Mortgage loaning was launched in the country since 25 March 2006, in accordance with standards of the Azerbaijani Mortgage Fund (AMF), functioning under the National Bank of Azerbaijan (NBA), and social mortgage was launched to grant since 7 February 2007.

The demand for mortgage exceeded the budget assignments and the AMF suspended to finance the mortgage on its standards since mid-July 2007. The fund received AZN 46mln from the public budget in 2005-2007 and AZN 34mln was set for 2008, with only the first installment at the rate of AZN 10mln of them was allocated to refinance by the fund the loans, which were allocated by the bank. A loan portfolio on the standards of AMF totaled AZN 67.8mln, with the total mortgage portfolio of banks at the rate of AZN 250 - 300mln.

The rates on loans range from eight percent (on standards of AMF) to 18-20% in commercial banks, with the term from 10 to 25 years.

However, the AMF intends to resume mortgage from subsequent year, but after commercialization of mortgage practice, done with the International Financial Corporation (IFC) assistance. Presently, the Academy of German Banks (AGB) develops for the IMF a strategy of its further activities, which will be submitted to NBA in November.

Presently, the subsidized mortgage model is applied by AMF that restricts mortgage financing in resources. A model for commercial mortgage will be introduced, first, to expand opportunities and to draw additional funds by the fund.

The commercial banks became to draw in actively the foreign lends through mortgage after suspension of loaning by AMF, but in connection with global financial crisis this activity reduced. The first loan from the Black Sea Bank of Trade and Development (BSTD) at the rate of $8mln was given to Texnika Bank in 2007. In 2008, the IFC granted $15mln to UniBank to finance the dwelling and the second loan at the rate of $5mln was granted to Azerdemiryolbank. The IFC considers the opportunity to grant mortgage to another bank by the end of year.

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