Mortgage lending becomes affordable
By Nigar Orujova
Since Azerbaijan has witnessed a construction boom, people's interest for mortgages has grown exponentially. Today, the state has decided to streamline the mortgage market, thus paving the way for Azerbaijanis to fulfill their home ownership dream.
The Central Bank of Azerbaijan plans to solve the pledge issue when it comes to new housing projects, said Elman Rustamov, Chairman of the CBA, speaking before the parliament.
At present, the mortgage issue has been complicated by the fact that apartments purchased under a mortgage deal in new building projects cannot act as collateral because of the absence of a deed.
"The population is experiencing great difficulties in this regard. They have to turn to relatives, neighbors and pledge their housing for a mortgage. We know about the problems in this area, and, based on international practice, we plan to move to a system of first registration," he said.
The CBA also plans to increase significantly funding of state mortgages, as well as the maximum amount of credit allowed within the commercial and social mortgage market. The bank also plans to expand the possibilities of mortgage lending throughout.
"We want to extend mortgage lending in the regions of the country and create a mechanism that will allow young families, as well as representatives of social groups, such as teachers and doctors, to take on mortgages," he said.
Experts said the cost of housing in Baku exceeds the purchasing power of the population. Mortgage helps to solve this problem partially, but the maximum amount of mortgage financing both conventional and social is 50,000 manat at present, and in some cases, this is not enough for the acquisition of property.
Therefore, the Central Bank plans to increase this amount significantly.
The country Mortgage Fund, which was created in 2005, aims to create a mechanism which will provide the population with housing through long-term mortgage lending, as well as assist in attracting foreign and local financial resources to mortgage lending.
To date, more than 30 banks, 16 appraisal companies and 21 insurance companies are authorized agents of the AMF. Since the beginning of the funding, the organization granted mortgage loans in the amount of over 636 million manat to more than 15,900 people.
Last year, the amount of loans fell by 14 percent in comparison with 2013, and reached 97.1 million manat. 2013 was the peak year starting from 2006, when 112.9 million manat loans were made.
The maximum size of a conventional mortgage at the AMF is 50,000 manat with an initial payment of 20 percent, at a rate of eight percent and a term of 25 years.
The social mortgage grants 50,000 manat, at an annual rate of four percent and a term of 30 years, with an initial payment of 15 percent.
Mortgage terms presuppose the issuance of a loan in the national currency - manat only - to Azerbaijani citizens. The subject of the mortgage can only be an apartment or private house and the amount of mortgage loan should not exceed 80 percent of the market value of the property.
The monthly payment for a loan does not exceed 70 percent of the monthly income of the borrower in Azerbaijan.
Preferable conditions are granted once to members of families of war victims, families of national heroes, internally displaced persons, civil and military servants, PhDs, sportsmen, etc.
Moreover, the information technology developing country made it possible for people to apply for mortgages online since February. The service aims to facilitate the accession to credit facilities, increased transparency
and strengthened the monitoring mechanism of the AMF.
Mortgage mostly interest young families in Azerbaijan, over 67 percent of mortgage contracts were signed to married couples in 2014. Single young people under 30 signed 37.9 percent of the agreements.
For any young family, buying one's own apartment or house is a priority. To simplify the purchase, the state has already proposed to reduce to a minimum or even cancel pre-payment/deposit for young families.
This year, the state plans to send 50 million manat from it budget toward the issuance of social mortgages - 25 percent higher than the amount of funding for 2014.
By 2016, the total amount of funds allocated from the state budget to AMF is expected to reach 266 million manat.
Another direction of the mortgage development policy includes improving access to mortgages in the regions of the country, as the Azerbaijani regions are currently not active in the mortgage market.
However, the economic and financial turmoil in the world on the background of falling oil prices is expected to have a significant impact on Azerbaijanis' buying capacity. Loan grantings decreased significantly this year, with only 74 mortgage loans in January and none in February.
Notwithstanding this depressive fact, more and more people marry so more apartments are needed in Azerbaijan.
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Nigar Orujova is AzerNews’s staff journalist, follow her on Twitter: @o_nigar
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