Azerbaijani Central Bank considering Turkey’s mortgage lending experience (UPDATE)

details added (first version posted at 14:51)

Baku, Azerbaijan, Jan. 26

By Seymur Aliyev - Trend:

The Central Bank of Azerbaijan (CBA) is considering Turkey's mortgage lending experience, said Elman Rustamov, the CBA chairman.

He made the remarks Jan. 26, at a session on banking activities held as part of a conference dedicated to the results of the second year of implementation of the 2014-2018 State Program on Socio-Economic Development of Districts of Azerbaijan.

"The government provides a state-owned company with land and necessary infrastructure in Turkey," he said. "The company constructs a building itself and then offers apartments upon mortgage terms without an initial payment and interest for 20-25 years."

He said that this variant allows involving more people from different sectors and providing them with jobs in the construction and production of construction materials.

Rustamov emphasized the importance of the government's role in this issue.

"We have been tasked to learn from the Turkish experience," he said, adding that a similar system can be used in districts of Azerbaijan."

As for the mortgage lending changes, which are being discussed now, he said that their use is expected within a month.

Rustamov added that in particular, the changes will affect the amount of an initial payment and collateral policy.

Some 50 million manats are envisaged in the state budget-2016 to finance the mortgage.

"Some 200 million manats are planned to be attracted to expand mortgage lending on the country's domestic market," Samir Sharifov, the Azerbaijani Finance Minister, said earlier.

Today the Azerbaijani Mortgage Fund delivers loans through the budgetary funds annually allocated to finance the social mortgage. However, it directs the funds from the placement of mortgage bonds to the ordinary mortgage.

Currently, the maximum amount of a common mortgage loan through the AMF is 50,000 manat at a rate of eight percent with a payback period of 25 years. Terms under the social mortgage are 50,000 manat at an annual rate of four percent with a payback period of 30 years. The initial payment under a social mortgage is 15 percent, whilst a conventional loan is 20 percent.

Conditions of mortgage lending are as follows: Loans must be issued in Azerbaijani manats and only to Azerbaijani citizens and the mortgage can only be for an apartment or private house.
The volume of mortgage lending must not exceed 80 percent of the market price and the monthly payment must not exceed 70 percent of the debtor's monthly income. It is compulsory to have an agreement on life insurance.

At present, the authorized banks of the Mortgage Fund are 30 banks (some 41 banks operate in the country).

AMF was established in December 2005. It began issuing mortgage loans in March 2006. The mortgage loans worth more than 730.17 million manats have been issued through AMF since the beginning of funding.

Some 20 insurance companies [their total number is 26] and 16 appraisal organizations are the participants of the mortgage market.

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