Download Central Asia and Azerbaijan: Regional Mortgage Market

Central Asia and Azerbaijan:
Regional Mortgage Market
Elena Klepikova
February, 2008
Regional Mortgage Markets
Azerbaijan M-market
Kazakhstan M-market
Kyrgyzstan M-Market
Tajikistan M-Market
Uzbekistan M-Market
2
Donor logo
Regional
Regional Mortgage Market
Azerbaijan
Country Mortgage Portfolio
4
Donor logo
Azerbaijan
Country Mortgage Portfolio
 6 banks have M-programs
 2 banks attracted long-term resources from IFI’s
 Banks’ long-term deposit base extended
 High demand for mortgage loans
Donor logo
5
Mortgage Loan Parameters: Changes 2007
Main Market Mortgage Loan Parameters
Rates/Fees/
Requirements
2007
2006
Interest Rate
17
19
Maximum Tenor (years)
15
10
Down payment
15-30
20-30
Life Insurance
NO
NO
Property Insurance
YES
YES
Title Insurance
NO
NO
6
Donor logo
Azerbaijan
Major Changes 2007
Purpose
Changes
Sales/purchase and mortgage -reduce expenses and term of document
agreement implemented
authorization
-prevent potential fraud
AMF requirements for
subsidies mortgage loans
softened
-reduce interest rate
-extend number of groups of the population
AMF's activity was suspended - make its activity market driven
- make self-sustainable structure
7
Donor logo
Azerbaijan
Main Problems Hindering the Market
Development

lack of covered bond and securitization regulations

lack of regulation on Escrow account

lack of housing certificate regulation

time of title registration and lien

unharmonized items in the existence Laws

undocumented mortgage-lending industry standards
8
Donor logo
Azerbaijan
Working Group’s survey on existing problems
BANKS
Azerdemir
yol
AGBan
k
Respublik
a
Standard
NB
C
Rabita
1. Covered Bond &
Securitization Law
5
5
5
5
5
0
5
5
4.37
2. Regulation on the
Escrow account
5
5
4
5
5
5
5
5
4.87
3. Housing certificate
regulation
5
5
5
3
0
5
5
4
4
4. Time for title
registration and its
lien
4
5
5
5
0
5
5
5
4.25
5. Harmonize items in
the existence of
legislation
5
5
5
5
5
5
5
5
5
6. Improvement of
Mortgage- lending
industry standards’
4
5
4
3
4
5
5
4
4.25
9
Texnika UniBank Aver
age
Donor logo
Azerbaijan
Actual m-portfolio exceeded the projected
in early 2007
70
65
mln.AZN
60
50
38
40
30
20
20
15 15
12
10 11
10 11
Standard
Mugan
10
0
Texnika
Unibank
Respublika
projected
10
actual
Donor logo
Azerbaijan
2011 Targets
ACTIVITIES
OUTCOMES
• Improving legal
and regulatory
environment
• New Laws and
amendments
to Laws
• Secondary
mortgage
transactions
• Improving
Mortgage-lending
industry
standards
• Standard
product/proce
-dures
• Market players
• Increasing public
awareness
G
R
O
W
T
H
OUTPUTS
IMPACT
• Mortgage as a
% GDP
• Mortgage as a
% banks’
assets
• Trained and
consulted
individuals
Mortgage portfolio to GDP is over 1%
Total mortgage portfolio is 5% of bank assets
TIME
Home
11
Donor logo
Azerbaijan
PRIVATE ENTERPRISE PARTNERSHIP
HOUSING FINANCE GROUP RETREAT
Regional Mortgage Market
Kazakhstan
Macro-economic Overview
• GDP in 2007 amounted to 95.4 billion USD. Real GDP annualized increase vs. 2006 -8.7%.
For the last 4 years the GDP rate kept above 9% per annum.
• GDP per capita exceeded 6 313 USD;
• Annualized inflation rate in 2007 was 18% (prelim data), November – 16%.
• Annualized Unemployment Rate (2006-2007) - 7.8%;
• Gross Foreign Direct Investments (FDI per annum) totaled at 10.6 billion USD (9 months).
Gross Foreign Direct Investments outflow amounted to 1.8 billion USD outflow (9 months) .
13
Donor logo
Kazakhstan
Institutional Environment
State owned participants as a part of the state program
•
•
•
Kazakh Mortgage Company (December 2000)
Kazakh Mortgage Credit Guarantee Fund (November 2003)
Housing Construction Saving Bank (Law passed in 2000, Bank started to work in 2003)
Commercial participants
•
•
Commercial Banks - 35 (2007)
Mortgage Companies – 10 (2007)
Graph 1
Graph 2
Accompanying participants
•
•
•
•
•
Insurance Companies – 41(37) (life insurance -7(3))
Credit bureau – 2006 (fully operational) -2.8 million credit files
Appraisers – exceed 2,500 in the country.
Realtors
Mortgage Brokers
Funding vehicle
•
Stock Exchange survey
Table 1
Graph 3
14
Donor logo
Kazakhstan
Legal Environment Last Year Update
•
•
•
•
•
•
•
•
•
•
The Law on Mortgage Lending has been reviewed;
The Law on Share Construction is being reviewed;
The Instruction on Mortgage Lending of non-bank institutions;
The State Construction Program for 2008 – 2010 years;
The Law on Realtors Activity is being proposed;
The “One Servicing Window” Approach to tackle corruption is
implemented;
Securitization Law is being amended;
Housing Relations Law is being drafted;
New Taxation Law Draft is being rectified;
Consumer Rights Protection Law – to be proposed by the Project;
15
Donor logo
Kazakhstan
Mortgage Market Last Year Update
Graph 4
Mortgage Portfolio Growth
Currency-Break Down
Regional Concentration
Housing Prices Overview
Graph 5
Graph 6
Graph 7
Mortgage Products
Insurance cost – 0.2%-0.4% real estate insurance,
0.25-0.3% - life insurance, title insurance -0.34%.
Registration charges – less than 10 USD (ap.)
Appraisal charges - 20 USD (apartments)
- 60 USD (houses).
Realtors charges – 1%-3%.
Brokers charges – 300 -700 USD
Bank or companies charges less then 1%.
Tenor - 3-25 (30), KMC (20).
Loan size – MC
2,500 – 500,000 USD,
KMC 5 000 – 500,000 USD
Banks – individual limits are imposed
LTV – 50%-70% (state M-lending program excl.)
Interest rate - 17% -19% in USD adjustable,
17%-18% KZT adjustable,
KMC - adjustable 12.04%+4% (2007),
22%-23% unverified income
16
Donor logo
Kazakhstan
Major Problems
Crisis or not Crisis –there is a Question?
Financial Sector

Inadequate Risk Management – Holding Risk Concentration;

Mortgage Loan Concentration;

Mortgage Affordability;

Lack of Financial Stock Exchange Instruments;

Bearish Real Estate Market Situation (Falling Market);

Inadequate Financial Sources Base;

Emerging M-Lending monopolist – KMC;

Inability of the M-lenders to keep with the previous year M-lending dynamics –
M-lending limitations;
Though interest rates are low the M-lending is not performed;
M-lending performed at 23%-25% level though now down—trend to 17%- 19% is
observed;
Consequential LTV increase to 50%-70%;
High inflation pressure due to economy over-heating;
17
Donor logo
Kazakhstan
Market Interaction
2007
2008
2009
Timeline of the Project
Project Clients
Project Clients
Project Clients
Project Activity
Project Activity
Project Activity
Market Response
Market Response
Market Response
Home
26
Donor logo
Kazakhstan
PRIVATE ENTERPRISE PARTNERSHIP
HOUSING FINANCE GROUP RETREAT
Regional Mortgage Market
Kyrgyzstan
Macro-economic situation in 2007
•Real GDP grew by 8.2% - 3 746,6 million USD
•GDP per capita - 714 USD
•Annualized inflation rate in 2007 was 20.1%
•Annualized Unemployment Rate - 11.5%;
•Nominal exchange rate USD/Som appreciated by 7% during 2007, to
37.3 KGSom/$US
•Remittances – ($1 billion or about 27% of GDP)
28
Donor logo
Kyrgyzstan
Financial sector development
•The Bank assets grew up to 51%
•Outstanding credit portfolio grew up to 85%
•Equity capital grew up to 39%
•Deposits up to 42%
•Non-bank financial institutions assets grew up to 12.8%
•The Stock market capitalization grew up from $80 million up to $162
million
29
Donor logo
Kyrgyzstan
Statistics of Mortgage Market in
Kyrgyzstan
•
Mortgage industry has been experiencing significant dynamics from 2.0% to
2.6% of GDP
•
As of December 31, 2007 the total value of the mortgage market is $98
millions
•
•
Share of mortgage: 8.4% bank assets, 17.3% loan stock
19 of 23 banks lending mortgage.
•
44 of 456 non-bank financial institutions offer mortgage loans.
•
ATF Bank, Halyk Bank, AUB, Finance Credit Bank and KICB account for
71.2% of the mortgage market.
30
Donor logo
Kyrgyzstan
Average Mortgage Loan Parameters
•
Most common type of mortgage is home or flat acquisition
•
Fixed interest rate with annuity payment
•
Average loan size: $21,000
•
Term: up to 10 years
•
Interest rate (USD): ≤ 18%
•
Monthly payment: $315
•
Required monthly household income: ≤ $530
•
LTV ≤ 70%, PTI 60%
•
US Dollars and Kyrgyz Soms
31
Donor logo
Kyrgyzstan
Improvements in legislative environment
Actual improvements:
• State fee for notarization reduced, 2005-2007
• Public access to Registration database, 2006
• Pledge regulations enhanced through changes to Civil Code, 2007
32
Donor logo
Kyrgyzstan
National Program on housing
approved by the Gvt in Dec 2007
The main topics of the program:
• Improvement of the legislation (due to list);
• Create the favorable environment to attract investments;
• Improving internal production of the construction materials;
• improvement of social and economic situation;
• Attract new construction technologies to the building industry;
33
Donor logo
Kyrgyzstan
Drafts developed by the Government
Drafts approved by the Government :
•
Draft law on MBS
Drafts initiated by the Government:
•
•
•
•
•
Draft Law on housing certificates
Housing code
Amendments to the Law on “Protection of consumer’s rights” in part of cosharing construction
Amendments to the Land Code
Amendments to Civil Code
34
Donor logo
Kyrgyzstan
Investment council under the President
New initiative is announced:
•
The mortgage industry is given much priority
•
Ministry of finance is the authority to create working group within 2 months
35
Donor logo
Kyrgyzstan
Drafts need to be developed
•
Amendments to the law on registration to exclude “Preliminary registration”;
•
Law on credit bureaus;
•
Law on appraisal activity;
•
Amendments to the existing legislation to avoid contradictions.
36
Donor logo
Kyrgyzstan
Housing finance problems
• Lack of long term funds
• Enhancing of mortgage legislation
• Lack of consistent government policy on mortgage
• Absence of understanding of mortgage among government officials and
population
37
Donor logo
Kyrgyzstan
Infrastructure institutions problems in Kyrgyzstan
Insurance Sector
Credit Bureaus
 2 credit bureaus
registered
 Still undercapitalized
 And concentrated in
Bishkek and Osh
 1 operates properly
 Transparent to all
participants
 No title insurance
Capital Markets
Appraisers/Realtors
 Few professional appraisers
 Still small and illiquid
stock market
 Few established realtors and more
speculative approach
 Small bond market
 Underdeveloped pension
system
 No objective market information
Donor
logo
Home
38
PRIVATE ENTERPRISE PARTNERSHIP
HOUSING FINANCE GROUP RETREAT
Regional Mortgage Market
Tajikistan
Recent phase in Tajikistan : from theory to practice
Total mortgage portfolio is a little more than 0.02% of GDP (2007)
2 resident banks are implementing mortgage products in
practice:
Tojiksodirotbank: running its own mortgage program (more than
30 mortgage deals for more than 850,000 USD at 2007). 24%
interest, 5 years monthly annuity.
Agroinvestbank: in 2008 is presenting the special deposit
program “House”. A 2 year deposit will be transferred to initial
payment, by this time the mortgage program of the bank will be
started by the plan.
Donor
Homelogo
40
CAMP:
implementation mechanism
CAMP – unified platform for all market participants to:
•
Develop uniform approaches
•
Find practical solutions
NOW
IN PERSPECTIVE
HOW?
• Working Group – IFC Project
initiative supported by the
NBT
• 5 members (the NBT,
Agroinvestbank,
Tojiksodirotbank, Amonatbank
and Tajprombank)
• Thematic and general
groups
Executive
Body: IFC
Project
• Self-governing
organization
• Broad-based membership
• Regular meetings
• Fanon Bank and FMFB shortly
will join
• Basis of future mechanism
41
Donor logo
Tajikistan
CAMP: achieved results
February 2007
Draft Law of the Republic of Tajikistan “On
Mortgage”
March 2007
Templates of standard documents for mortgage
loan origination and disbursement
April 2007
Draft manual for conducting mortgage
lending operations
December 2007
January 2008
Draft Law is passed by both Parliament
Chambers but President did not approve it and
proposed a new draft with his amendments
Draft Law with President’s amendments is passed
by both Parliament Chambers
42
Donor logo
Tajikistan
CAMP 2007-2009: improving the
enabling environment
PRIORITY TASKS

Adopting of Law “On Mortgage”

Eliminating of contradictions in mortgage-related
legislation

Providing support for developing a mechanism for a
simultaneous registration of title transfer and
mortgage

Building capacity of market players (banks, insurance
and appraisal companies)
43
Donor logo
Tajikistan
CAMP 2007-2009:
Issues for Tajikistan
•
Need for broader based coverage of potential bank partners for pilot
projects
•
Potential conflict with IFC bank eligibility criteria
•
Bank refinancing is vital
Donor
Home logo
44
PRIVATE ENTERPRISE PARTNERSHIP
HOUSING FINANCE GROUP RETREAT
Regional Mortgage Market
Uzbekistan
Update on Legislation
2006/
2007
2008
1 Quarter
2 Quarter
3 Quarter
4 Quarter
Draft of Law
On Mortgage
Backed Securities
Draft of Law
On Registration
Draft of Instruction
On Mortgage
Registration
Draft of Document On
Standard Mortgage Note
Governmental
Working
Group (GWG)
Drafting
Approval
within the
GWG
Submission
to MinJust
46
Submission
to CM
Submission
to LCh
Donor logo
Uzbekistan
Procedures expected to be
enforced via bylaws
Draft of Instruction On Mortgage Registration:
•
Simultaneous state registration of sales-purchase agreement and mortgage;
•
Absence of mortgage registration duty and notarization;
•
Reduction of paper flow volume for registration;
•
Formalization and state registration of operations with Mortgage Note;
•
State registration of court notifications, etc.;
Risk associated with novations implementation
47
Donor logo
Uzbekistan
Update On Housing Finance
Market In Numbers
•
Total banks number:
•
Banks, not engaged into HF:
•
•
27
Geography of HF Deals
Республика
Каракалпакстан
Андижанская обл.
6
Total number of deals: 3320
Total Portfolio: 65615 mln
UZS= aprox 51 mln USD
Бухарская обл.
Джизакская обл.
Кашкадарьинская
обл.
Навоийская обл.
fdsfgdfghg
Наманганская обл.
Самаркандская
обл.
Сурхандарьинская
обл.
Сырдарьинская
обл.
г.Ташкент
Ташкентская обл.
Ферганская обл.
Ipoteka Bank – the leader, almost 46% of the total HFM
48
Хорезмская обл.
Donor logo
Uzbekistan
Update On Terms
“Commercial” terms
Currency: local;
Age: 18-60;
3 main products:
mainly secondary housing;
amount: ≤25000 USD; ≤10 years; 1420%; no pre-payment penalty; down
payment: ≥25%
“Young Families”
Currency: local;
Age: 18-30;
mainly secondary housing;
amount: ≤25000 USD; 15 years; 5%;
no pre-payment penalty; no down
payment
Acqusition
49
Construction
Renovation
Donor logo
Uzbekistan
Thank you for your attention!
Donor
logo
Home
50