BISHKEK (TCA) — The program of the Government of Kyrgyzstan “Affordable Housing 2015-2020” will soon give positive results, Prime Minister Sooronbai Jeenbekov said at a Government meeting on November 28.
The program has been developed for the first time since Kyrgyzstan’s independence, so part of Kyrgyz society may be dissatisfied with it, Jeenbekov said. “It is impossible to solve all the problems in one day, but the most important thing is that [mortgage] loans are now issued at 10% per annum and there is a certain category of the population which is satisfied with the terms of the State Mortgage Company. More than 500 borrowers have received mortgage loans [so far],” the Prime Minister said.
He stressed the need to increase the number of participants in the state mortgage program up to three thousand people in 2017. To achieve this goal it is necessary to find additional sources of funding. The SMC was tasked to simplify the conditions and mechanisms for obtaining mortgage loans and to lower the interest rates.
Unaffordable housing
Last week, MPs criticized the State Mortgage Company for its high interest on loans and high salaries of the company’s management.
Those who have received mortgage loans under the Affordable Housing Program now regret about it, MPs said. The housing is very expensive, and 1,119 people have refused from taking loans. For instance, one participant of the program who has taken a 2-million-som mortgage loan has to repay 25 thousand soms (around $350) per month, which is unaffordable for civil servants, MP Ryskeldi Mombekov said and proposed to review the program. According to the National Statistics Committee of Kyrgyzstan, the average monthly salary is 13.6 thousand soms in the country.
According to the leader of the ruling Social Democratic Party of Kyrgyzstan (SDPK) MP Isa Omurkulov, the problem lies in the State Mortgage Company which lives at the expense of the program participants.
The program and its financial sources cannot ensure the implementation of the program. The SMC plans to involve commercial banks in the Affordable Housing Program but it is just an idle talk, the PM said. Commercial banks provide mortgage loans at 20% per annum, and it is unlikely they would reduce their rates. The existing financing conditions will not allow providing public-sector employees with housing until the SMC changes its policy, Omurkulov said.
It is vital to improve the program, otherwise the MPs would insist on elimination of the company. The Government is responsible for the unpopularity of the SMC, which is just a performer of the Government’s policy, SDPK deputies said.
About State Mortgage Company
According to the State Mortgage Company, the program aims to provide people with housing through mortgage lending and construction of affordable housing not only in the regions but also in the capital Bishkek where the demand for housing is high.
The main source of the SMC funding is its capital worth 310 million soms. The sole shareholder is the State Property Management Fund. The Company started issuing loans in March 2016.
About six thousand citizens have been listed to participate in the Affordable Housing Program. The company plans to lend 800 million soms by the end of this year and intends to issue its own securities and establish its own savings and loan bank.
Housing affordability
Kyrgyzstan has one of the lowest housing provision indicators among the CIS countries — 12.7 square meters of housing per person, while the average CIS requirement is 18 square meters, which is only met in Kazakhstan (18.1 square meters per person) and Russia (21 square meters).
Under the term “affordable housing”, the Kyrgyz Government means housing that is not high in price. In international practice, the main indicator of the possibility of purchase of housing is the “housing affordability index”.
For instance, the Russian Federal Housing Program applies the ratio of an average cost of one-bedroom apartment to the average annual income of an average family of three people. The availability ratio shows how many years it will take to purchase housing by such a family. Kyrgyzstan has not applied such scheme.
According to experts, projects to address the housing problem will not be feasible if they do not involve active participation of the State and an increase in the incomes of the population. The popularity of mortgage loans will also depend on the state of the economy and the investment attractiveness of Kyrgyzstan.
