Housing banks in Azerbaijan may have state support

Business Materials 15 July 2011 17:33 (UTC +04:00)

Azerbaijan, Baku, July 15 / corr Trend I.Khalilova /

Future prospects for establishing housing savings banks in Azerbaijan remain a topical issue.

"This mechanism, along with the Azerbaijan Mortgage Fund and other financial institutes, will assist in addressing an important social problem - housing," the Central Bank of Azerbaijan (CBA) told Trend.

Based on the "Action Plan for 2011-2015 on the State Program for Poverty Reduction and Sustainable Development for 2008-2015" approved by Azerbaijani President Ilham Aliyev on June 28, support will be given to creating housing and saving banks.

International experience shows that universal banks are involved in such operations.

"Saved deposits supported by state subsidies can be attracted by specialized banks, which act based on special prudential norms and provisions," the CBA said.

From this aspect, the legislation does not ban commercial banks in the country from offering products formed on the basis of saving deposits, the CBA added.

The use of such tools in the country meets the modern realities and the public is interested in acquiring property through the savings mechanism.

Various options are used throughout the world. The share of savings to receive a mortgage loan can be 50 or 30 percent

The CBA previously prepared a draft law on housing and construction banks, and submitted it to the Presidential Administration.

However, the crisis that hit the global market did not allow Azerbaijan to implement the project.

These systems have to be implemented in a trustworthy fashion from an economic point of view and be attractive for investors.

Today, the world is seeing reduced tensions after the crisis. The CBA is now working to make this alternative form of lending more active, head of the CBA Legal Department Rana Malikova said earlier.

The CBA has been provided with expert help through the German KfW Development Bank.

Housing and construction banks will provide a social direction for mortgage and housing lending. To accelerate the process of issuing loans, registration will be conducted via the "single-window" principle and an e-registration system.

The bill envisages the creation of housing and construction banks as separate institutions.

The concept behind housing and construction banks is for citizens to receive mortgages by making bank deposits.

The loan volume will significantly exceed the deposit amount.

The Azerbaijani Mortgage Fund provides mortgage lending through 22 authorized banks at the expense of the state budget and through the placement of mortgage bonds by financing commercial mortgages.

The CBA is designing a new strategy for developing mortgage lending, which envisages simplifying mortgage lending the country.

Mortgage loans worth 43.8 million manat were issued through the Azerbaijan Mortgage Fund (AMF), acting under the Central Bank of Azerbaijan, in January-June 2011.

Since funding began by the AMF in 2006, mortgage loans worth 293.7 million manat were granted as of July 1.

The total amount of refinancing loans issued by banks earlier amounted to 33.4 million manat. Some 5.6 million manat out of 20 million manat envisaged in the 2011 state budget for financing the social mortgage has been issued since the beginning of the year.

Conventional mortgages are financed by funds from the placement of mortgage bonds. The AMF placed bonds worth 41 million manat in the first half of 2011.

Under the AMF's terms, the maximum amount of the issuance of conventional mortgages in Azerbaijan is 50,000 manat at a rate of eight percent and for 25 years. But the amount in the social mortgage is 35,000 manat, at an annual rate of four percent and the term - 30 years.

The Azerbaijani Mortgage Fund was established in September 2005 by an Azerbaijani presidential decree. Its charter was approved by a separate presidential decree in December 2005.

Mortgage lending on AMF standards launched in the country in March 2006.

Official rate was 0.7865 manat per $1 on July 14.