Mortgage industry appropriation to boost real estate market

By Aynur Karimova - AzerNews 

The allocation of an additional 200 million manats for mortgage loans from Azerbaijan’s state budget will lead to growth in the real estate market and the development of the construction sector in the country, said MBA Consulting General Manager Nusret Ibrahimov on July 14.

"Mortgage loans play an important role in stabilizing the real estate market. In 2008-2009, the real estate market was in a state of crisis, and it revived due to the fact that mortgage loans were resumed in 2009. Currently, the [real estate] market is experiencing its most passive period, so additional funding will increase activity in the market, which will lead to the development of the construction sector," the expert told Trend, commenting on President Ilham Aliyev's statement at a meeting of the Cabinet of Ministers on the results of the country’s socio-economic development in the first half of 2015 and the objectives for the future.

President Aliyev instructed the relevant bodies to allocate additional funds to aid the mortgage industry from the state budget by the end of this year.

"There is a great need, in particular, to improve the living conditions of the youth and other categories of people. I consider that at least 200 million manats and possibly more funds should be allocated from the state budget before the end of the year. The Ministry of Finance and the Central Bank are engaged in this issue, they are given relevant instructions and after a certain time, they should report to me on the fulfillment of this issue," the head of state said.

President Aliyev said that there are two approaches to spur growth in the real estate market: the funds will be provided for the purchase of property in existing buildings or new buildings will be constructed.

"Of course, the construction of new residential buildings would be appropriate to revive the construction sector, but it will take some time. Therefore, it would be good to use a synthesis of these two approaches," President Aliyev said.

In Azerbaijan, the maximum amount for mortgage loans provided via the Azerbaijan Mortgage Fund is 50,000 manats 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 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.

Ibrahimov also noted that the funds allocated from the state budget will be mainly used to finance social mortgages.

"However, revenues from social mortgage indirectly finance the conventional mortgage as well. When loans are repaid, funds are accumulated in the Azerbaijan Mortgage Fund, which are then used to finance conventional mortgages. Thus, these funds will be used for financing both of the social and conventional mortgages," the expert added.

The official exchange rate as of July 14 was 1.0486 AZN/USD.