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Dmitry Medvedev asked banks to make housing more affordable
First Deputy Prime Minister of the Government Dmitry Medvedev yesterday called on Russian bankers to more actively participate in the implementation of national projects, in particular the “Affordable and Comfortable Housing” program. In response, bankers, recognizing their role in solving the housing issue, pointed out that there was too much imbalance between supply and demand in the real estate market, the correction of which was not within their competence.“Mortgage lending can serve as a positive example of the participation of banking capital in the development of housing construction,” says Mr. Medvedev. According to him, about 350 banks are already working on mortgage programs. At the same time, only “large banks” actually deal with mortgages, the First Deputy Prime Minister believes. This situation, in his opinion, needs to be changed, “naturally, not by administrative means, but by creating a purely market motivation for banks’ participation in these projects.” Medium-sized banks can be interested in mortgages, says VTB Senior Vice President Andrey Suchkov, “by reducing the cost of attracting resources from the market. It is necessary to create a refinancing system; this is now being done, in particular, by AHML.” According to Igor Zhigunov, a member of the board of the City Mortgage Bank, the emerging mortgage securities market should play an important role. However, in any case, “mortgages need to be dealt with in a specialized manner,” Mr. Zhigunov believes, “otherwise, bank programs may turn out to be ineffective.” In the meantime, this market is divided between Sberbank, VTB Group, as well as several banks with foreign participation.
According to Mr. Medvedev's forecasts, by the end of 2006 mortgage loans worth 108-110 billion rubles will be issued. Last year, the market volume amounted to about 60 billion rubles, and, according to the Federal Registration Service, 78.6 thousand mortgage transactions were registered. “This figure is more than realistic,” says Mr. Suchkov. It is noteworthy that the bankers themselves attribute the growth of mortgages not so much to the conditions for obtaining loans by the population, but to the supply on the market. “The demand for mortgage offers from banks is everywhere. And mortgages will dominate where there is a real supply of apartments. So it’s more up to the builders,” says Roman Vorobiev, director of the Bank of Moscow’s retail business department. “In principle, we can talk about reducing mortgage rates at a faster pace than now,” says Mr. Suchkov. “But the availability of mortgages is growing, but the affordability of housing is not.”
Construction in Russia has indeed become much smaller. According to the head of Business Russia, Boris Titov, after the law on shared participation was introduced last year, the commissioning of housing decreased by 40%, which caused an increase in real estate prices by an average of 30%. The law provides, in particular, for the joint liability of banks for the loan obligations of developers. Banks, in turn, not wanting to bear the risks of builders, simply stopped lending to them - as a result, the number of housing under construction has sharply decreased.
In this regard, many are proposing to slow down the overly accelerated bank mortgage machine in order to reduce the demand for housing and cool the real estate market a little. In particular, Kaliningrad Governor Georgy Boos spoke about this a week ago at a meeting of the working group on the national housing project. In his opinion, the emphasis of state support for mortgages needs to be shifted from the financial sector to the construction sector. However, today government support for a highly competitive sector, which is the construction industry, would look very strange. And yesterday, Dmitry Medvedev firmly made it clear that it would be wrong to “squeeze” the demand for housing (this, after all, directly contradicts the ideology of the national project), but mechanisms for expanding supply should be sought by everyone together.
One of these mechanisms is the authorities' planned abolition of the joint liability of banks for the loan obligations of developers. Both Mr. Medvedev and President Putin announced this yesterday at a meeting with representatives of the business community.
“Banks simply stopped lending to us,” says Evgeny Fetisov, deputy general director of the investment and construction company Novaya Ploshchad. - For construction we need tens, hundreds of millions of dollars, and where can we get them if not from credit institutions? Construction companies do not have such own funds.” Developers expect that after amendments to the law, banks will become more favorable towards lending to their projects. “I think the situation will change for the better. And we will be able to build more,” says Mr. Fetisov.
But bankers are not so optimistic. According to Mr. Suchkov, the abolition of joint and several liability is unlikely to have a significant impact on the growth of construction. “There is another important aspect in the law - the developer does not have the right to start construction and, accordingly, sell housing to private clients until all the necessary documentation has been collected. The requirement is, of course, correct, designed to protect the rights of buyers, but obtaining all permits is a bureaucratic process, which delays the start of construction,” he says. In addition, according to Mr. Zhigunov from the City Mortgage Bank, “regardless of whether the bank is jointly and severally liable or not, an important factor is the capitalization of the developer, his ability to repay the loan; and there are not many such companies on the market.”
Developers and bankers are unanimous in one thing - there is a catastrophic shortage of places where they can build housing. “There are very few places left for development in Moscow where communications have been laid,” says Mr. Suchkov. “We do not have the opportunity to introduce new construction sites,” agrees Mr. Fetisov.
As is known, municipal authorities are in no hurry to sell plots of land for development at open auctions. Even before the decision was made to hold public auctions, the areas ready for development were leased to structures close to the municipal authorities. According to some estimates, the total volume of such areas is five times (!) the volume of annual housing construction. Apparently, the problem of the lack of sites will have to be addressed first by Mr. Medvedev, since back in mid-March he warned: the authorities “have enough channels of influence on municipalities in order to force those officials who have turned the leasing of land into a personal business Still moving in the right direction."