Azerbaijani central bank aims to boost low-cost housing market
By Aynur Jafarova
The Central Bank of Azerbaijan is in talks with the government and the banking sector on the development of a major project to provide affordable housing in the country, CBA chairman Elman Rustamov said on Friday.
"We have to increase the volume of funding within the commercial mortgages and perhaps social mortgages as well," Rustamov said. "However, it is not an endless process. The main thing is to expand the offered market of cheap housing in order to make it possible to purchase decent housing through a mortgage loan. The business, the state and banking community should be thinking about the ways to implement this."
He said the availability of low-cost, affordable, renovated housing in the country is very important, especially for young people.
"We will increase the funding of commercial mortgages. We have the opportunity to increase borrowing from the market at the expense of bonds this year," Rustamov said.
He said the amount of commercial mortgages provided by the Azerbaijan Mortgage Fund (AMF) could be increased to the maximum extent in 2013.
Rustamov also spoke about the problem loans in the mortgage lending portfolio of the Azerbaijani banks, noting that their share is at the level of 0.3 percent, which shows the effectiveness of this mechanism in the country. According to him, a half of such instances are related to family circumstances rather than economic aspects.
"This is a very low figure which shows that good regulation and a good and effective system have been established in this sphere," he said, noting that the failure is of social, rather than economic nature.
"That is, the non-payment is related to someone who gets a divorce, loses the head of the family and so on."
More social mortgages
The range of population groups who have access to social mortgages in Azerbaijan is to be expanded.
Rustamov said the CBA recommends that local banks provide more information to the society about the payment of social mortgage loans.
He said the groups of people eligible for such credits will be expanded, adding that "we are considering civil servants, young families, military men for being entered into the list of persons having access to privileged mortgage loans".
"Currently there is a lack of resources for social mortgages and we are considering options how to increase it. We will issue a proposal for increasing the funds from the state budget for social mortgages," Rustamov said.
According to Rustamov, the CBA advises the banks to be more open and to provide information to the society about loans. It is necessary to publish information on ways of borrowing social mortgage loans.
"I am satisfied with the level of transparency, however, more communication is needed," he added.
Around 40 million manats were envisaged in the 2013 state budget to finance social mortgages through the AMF, which operates under the CBA. An ordinary mortgage is financed through funds obtained from placing mortgage bonds.
Currently the maximum amount of a general mortgage loan is 50,000 manats at a rate of eight percent with a payback period of 25 years. Under the social mortgage, the figure is 50,000 manats with annual rate of four percent and payback period of 30 years.
According to the terms of the AMF, the down payment under the social mortgage is 15 percent while that under the common loan is 20 percent.
In the first quarter of 2013, loans amounting to 15.19 million manats were allocated through the AMF. The figure is 4.47 percent more compared to the same period of 2012.
There are 27 authorized banks, 21 insurance companies and 11 appraisal organizations that are participants of the domestic mortgage market. Mortgage loans have been delivered to more than 11,000 families to date.