Parallel to the development of this market, it is also very important to improve the conditions. It’s no secret that a lot of citizens are dreaming of buying apartments with mortgage credits. We talked to the chairman of “Unibank”, Vardan Atayan on possible developments of this market and related issues.
– How can you explain the recent active discussions on the mortgage credit market? Some people refer to the newly built buildings in Yerevan and the problems of selling.
– Yes, this field is getting more active and this tendency will continue. There are other reasons stimulating this like the financial transfers from abroad and economical growth. People spend these transfers on different things, they also buy apartments. I think that there will be serious changes in the mortgage credit market this year in regard to the coverage period and interest rates. For instance our bank has already taken certain steps: we have decreased the interest rates as well as prolonged the period of coverage up to ten years. Some other banks have taken certain steps too and this means that the competition is getting stronger and the market is developing. Currently we provide mortgage credits with 16% interest rate, but we may decrease it to 14% in the near future. Taking into account the fact that the banks of Armenia take these financial resources for 8-9% interest rate, we can say that the mentioned interest rates are not so high for our market.
– Recently the “The union of Armenian mortgage credit market participants” held a foundation meeting. What kind of problems is this union going to solve?
– This newly established union has a lot to do in the future. First they are going to instill general principles and apply them in our market, which is very important for the formation of secondary mortgage credit market. Currently the mortgage credit portfolio of “Unibank” places second in Armenia after HSBC/Armenia bank: it covers 4 million dollars. We have over 400 credit borrowers. It is also worth mentioning that our bank is the only one in Armenia to provide mortgage credits in Marzes, especially in Tsakhkadzor, Gyumri and Vanadzor. This process is important for people because they already feel that they have capital in the form of real estate. Generally mortgage credits are a serious psychological factor and support the economic development much. In developed countries people usually buy everything with the help of mortgage credits. In this case borrowers are responsible for covering the credits and do their best not to lose their property. I think this year we will be able to increase our mortgage credit capacity for three times up to 10-12 million dollars.
– It is said that one of the obstacles of the mortgage credit development is the low capacity of long-term credits. Banks are not able to recruit long-term resources in order to use it in mortgage credit lines later. What do you think about this?
– We were afraid of this too. But our experience shows that in parallel to the increase in mortgage credit capacities as well as deposit capacities. So, people that sell their apartments with the help of mortgage credits as a rule keep this money in the same banks as deposits. This is a very important factor for banks: both savings are increased and the banks are able to give more credits. Now we have no problems connected with resources, what’s more, a lot of Armenian banks have extra unused money: there are resources but there are not enough places to distribute these resources. I think in the result of this development banks will also start providing credits in regions.
– What kind of influence will the German KfW bank’s mortgage credit program have in Armenia?
– Both the KfW and IFC are seriously interested in the Armenian mortgage credit market. “Unibank” is going to participate in the program implemented by these big international organizations. Mortgage credit market is considered to be profitable in the whole world because the prices for real estate property are rising. These prices have been increased several times in Armenia too.
– Do you think that in case of the mortgage credit market development the prices for real estate property will increase too?
– Of course, this will support the price increase, but on the other hand it will regulate the market. The increase of prices for real estate property will lead to the increase in the security level of mortgage credit portfolio of banks. As a result of this, banks will get resources from international organizations and will strengthen their mortgage credit portfolio more.
– Do you think that it is right to build many high, multi-story buildings in the center of Yerevan?
– In order to provide a monotonous increase of prices they should not concentrate all buildings in one place. I mean they should build buildings in suburbs too. There is also need of apartments with lower prices. For example we can give mortgage credits without any prepayment with the purpose of buying an apartment for 30,000 dollars. People can buy apartments and pay back the sum within ten years. This is the reason why there is a higher demand for these kinds of apartments than for apartments in the heart of the city that cost over $200000. According to our calculations, currently in the Armenian market there is demand for about 20-25000 apartments. According to the calculations of the KfW the demand of mortgage credit market in Armenia will cover about 150 million dollars in 2007-2008. But currently this capacity doesn’t exceed 20 million in Armenia. This means that it has to be yet increased by 7-8 times.
– Could you please classify your clients based on percentage?
– Most of our clients, about 80%, are medium businessmen. There are specialists involved in private sector too: directors, accountants, managers, etc. Alas there are not many state employees because their salaries are not enough for taking mortgage credits.
– How do you choose who gets the loan? What are the principles?
– There are a lot of principles and standards and the main ones are their good credit history and income. Of course we usually take into account that each family member spends $100 dollars a month. If their income is enough for both this expenditure and covering the credit, we give it to them. We usually consider the limit of $1000 monthly income good. It is also worth mentioning that we have difficulties with evaluating the real income of citizens because most of their income is shadowed and we also have to take this into account.