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Government seeks to simplify conditions for issuing mortgages

20 January 2016 14:19 (UTC+04:00)
Government seeks to simplify conditions for issuing mortgages

By Aynur Karimova

The government of Azerbaijan intends to simplify the conditions for issuance of mortgage loan and increase the highest sum of the loan. Such a need arose due to the cheapening of the national currency, the manat, which was devaluated twice last year.

"A relevant decision in connection with mortgage lending will be signed in three to four days," Azerbaijan’s Finance Minister Samir Sharifov said on January 20. “The documents in connection with mortgage loans have already been submitted to the country’s Cabinet of Ministers."

Sharifov believes that today, it is very important to build a new structure of the Azerbaijan Mortgage Fund, so that it could draw financial resources. In this regard, the management structure of the AMF is being changed.

"This will meet the demand for mortgage loans in the country," he added.

In Azerbaijan, the maximum amount for mortgage loans provided via the Azerbaijan Mortgage Fund is 50,000 manats ($31,304) with a rate of eight percent and maturity term of 25 years. The “social mortgage loan,” however, is issued in the amount of 50,000 manats ($31,304) with an annual rate of four percent and for a term of 30 years.

A 15-percent down payment is required to receive this type of loan, compared to 20 percent with a conventional loan.

The social mortgage loan is allocated in Azerbaijan’s national currency, the manat, and the beneficiaries should be Azerbaijani citizens.

Mortgages are only given for apartments or private housing and the amount should not exceed 80 percent of the market value of the property. The monthly payment for a loan must not exceed 70 percent of the monthly income of the borrower, who should also produce a copy of his/her life insurance agreement.

The family members of martyrs, families of National Heroes of Azerbaijan, internally displaced persons, civil servants with work experience of no less than three years, Ph.D. holders, persons who have achieved special merits in sports, as well as those who have a minimum of three years military service can enjoy these preferential rates.

This year, the state plans to send 50 million manats ($31.304 million) from its 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 manats ($166.54 million).

Meanwhile, Sharifov said that the Finance Ministry sees no need to change the interest rates on mortgage loans as "rates on these loans are enough low."

Budget expenditures to be revised

Sharifov went on to add that expenditure part of Azerbaijan’s state budget for 2016 will be revised.

First of all, according to the minister, this step will be taken due to certain price increases caused as a result of the new exchange rate policy of the government.

"The government offers certain social benefits to reduce and mitigate the impact of this increase on the most vulnerable groups of the population," he said. "In this regard, there is a special instruction of the head of state, according to which appropriate changes will be made to the state budget."

He believes that it is necessary to revise the expenditure part of the budget to create financial security for increasing salaries and allowances for food expenses for internally displaced persons and other social benefits.

"Forecasts of the state budget should be revised in connection with drop in revenues," Sharifov stated. "We should ensure the increase of sources of revenue. All these issues will be reflected in a new version of the state budget for 2016."

Azerbaijan's state budget for 2016 is based on oil price of $50, while the forecasts of the state budget will be formed on oil price at $30 per barrel.

Revenues of state budget for the current year are approved at 14.566 billion manats ($9.12 billion), while expenditures - at 16.264 billion manats ($10.18 billion).

Official exchange rate on January 20 was 1.6028 AZN/USD.

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Aynur Karimova is AzerNews’ staff journalist, follow her on Twitter: @Aynur_Karimova

Follow us on Twitter @AzerNewsAz

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