Armenia receives EUR 20 mln loan from KfW to implement fourth stage of mortgage lending program

ArmInfo. The German KfW Bank has provided Armenia with a EUR 20 mln loan (in AMD equivalent) or implementation of the fourth stage of the mortgage lending program, CEO of National Mortgage Company UCO Hayk Voskanyan and KfW representative Judith Boehnke said at a press conference on February 1.  

When replying to ArmInfo's question, Voskanyan said that at the current stage the program partners will be 5 banks and 3 UCOs, which will receive the funds from the National Mortgage Company (the UCO that refinances mortgage loans). The program participants are ACBA Credit Agricole Bank, Converse Bank, Armbusinessbank, INECOBANK, Ardshinbank, First Mortgage Company UCO, Global Credit UCO and Kamurj UCO.

Voskanyan said that amid the growing affordability of the resources, the National Mortgage Company will be able to fully place the funds within 2 years even in case of dropping economic activity. "If we look at our statistics, in 2016 we managed to provide 1 billion AMD loans monthly despite the general trend of the mortgage market. Now, due to the activities of our company and the Affordable Housing for Young Families program, the share of AMD loans is rising. In this context, I think the slackening growth of economic activity will have an insignificant effect on the mortgage lending dynamics. I am an optimist and I suppose the economic activity growth will accelerate within the next 1-2 years," he said.           

He pointed out that this year the program focuses on enhancement of energy efficiency and intensification of housing purchase in the provinces. He explained that at the 4th stage of the program 2/3 of the funds will be spent on financing the measures aimed at increasing the energy efficiency (replacement of windows, doors, heat insulating, installation of solar and photo voltage panels, etc.). He added that the interest rates for the residents of provinces will be reduced by 1 pct point from the current average market 12-13% to promote mortgage lending in the provinces. "Given the small population in the provinces, the current figure for mortgage lending in the provinces is insufficient. Therefore, at the fourth stage we are going to stimulate the growth mortgage contracts with the focus on the provinces," he stressed. The residents of the provinces will enjoy certain privileges: the loan repayment schedule will be coordinated with the seasonal profit period. In case the residents acquire or build a house that costs no more than 2 mln AMD, no collateral is needed.

Judith Boehnke, in turn, pointed out that the KfW Bank has been working on the Armenian mortgage market for 10 years. Given the successful experience of the previous programs. A decision has been taken to launch a new level of lending focused on enhancement of energy efficiency. At the previous stages, 20 banks of Armenia actively participated in the program.  This year the program involves only 8 participants, she said.   

To note, National Mortgage Company UCO was founded on 16 June 2009 by the Central Bank's decision to refinance mortgage loans. As of 1 Jan 2017, the total amount of the loans refinanced by the NMC amounted to over 53 bln AMD (39% year-over-year growth). The assets totaled 57.3 bln AMD, with 23.4 bln AMD of this amount being the share of the loan book. The NMC's total capital amounted to 23.4 bln AMD (45.4% year-over-year growth). At the yearend of 2016, the NMC's net profit was 1.3 bln AMD (25% year-over-year growth). (The average AMD/USD exchange rate on 31 December 2016 was 483.94 AMD/$1).

According to the Financial Rating of Armenian Banks and Credit Companies, as of 1 October 2016, the summary mortgage lending portfolio amounted to 321.2 bln AMD ($677 mln), with 41% or almost 132 bln AMD ensured by NMC, Affordable Housing for Young Families, First Mortgage Company, and Fides.  Over the specified period, the mortgage lending year-over-year growth slackened from 23% to 15.6%.