Mortgage loan debt per capita in Armenia for 9 months of 2023 was USD  861 per person

ArmInfo.Mortgage loan debt per capita in Armenia for 9 months of 2023 amounted to $861 per person. The volume of the mortgage burden in the country is lower only than the indicators of Russia ($1397), ($1397), but significantly exceeds the indicators of Kazakhstan ($597), Belarus ($487), Azerbaijan ($198), Uzbekistan ($132) and Kyrgyzstan ($47).

According to an analytical study by the Russian INFOLine agency, the  mortgage portfolio (the balance of mortgage loans) in the country at  the end of 9 months of 2023 amounted to almost 1 trillion drams,  having increased by 27.7% over the year (by 31.3% to $2.6 billion).  According to agency analysts, the main driver of housing construction  in Armenia is the income tax return program for mortgage interest  payments (tax deduction) in the primary market, thanks to which  lending is growing, as noted, "even in the conditions of economic  uncertainty".

Meanwhile, according to the Financial Rating of banks and credit  companies in Armenia as of September 30, 2023, prepared by ArmInfo  IC, mortgage lending in Armenia accelerated the y-o-y growth rate  from 20.5% to 24.8%, ensuring a volume of 1.3 trillion drams ($3.2  billion). This is the total volume of mortgage lending from all 18  banks and three mortgage companies - the National Mortgage Company,  Affordable Housing for Young Families and the First Mortgage Company.  At the same time, the bank's mortgage portfolio slowed down its y-o-y  growth from 31.5% to 28.8%, amounting to 1.02 trillion drams ($2.6  billion). Among the banks, the TOP-3 continues to be headed by  Ameriabank, the second place is held by Ardshinbank, and AMIO Bank  (formerly Armbusinessbank) has moved to the third place, the total  coverage of which exceeds 45% of the bank's mortgage portfolio or 36%  of the total mortgage portfolio (including National Mortgage Company,  Affordable Housing for Young Families and the First Mortgage  Company).

According to independent analysts, the uncontrolled growth of real  estate prices in 2022 and 2023 is due to a strong wave of immigrants  from Russia, which supports the government's income tax refund  program for holders of mortgage loans in the primary market, which  began to form a market bubble, the existence of which the country's  economic authorities de facto do not deny. That is why the RA  government is canceling the income tax refund program step by step.  The government proposes to gradually narrow the scope of the system  both temporally and territorially.

The "tax deduction" program has been in effect since November 2014.  In 2017, the financial authorities of Armenia stated that the legal  norm was aimed at  creating stable and effective demand in the  sector, as well as  solving social problems.  Meanwhile, the social  component turned out to be insignificant, and  state treasury  expenses increased sharply. As a result, from July 1,  2022, a  gradual abolition of the income tax refund system on mortgage  loans  began in Yerevan. It was noted that from this moment the income  tax  will not be refunded to those citizens who decided to purchase an   apartment on a loan in the 1st zone of Yerevan (center) and received   a loan for it after this period. From January 1, 2023, income tax   refunds were canceled for those who purchased housing in the 2nd   zone, and from July 1, 2023 in the 3rd zone.  Then a 1.5 year break  is  offered.  For the rest of the city of Yerevan, a precondition for  obtaining a mortgage loan was established by January 1, 2025.

It is expected to establish that after January 1,  2027, income tax  on mortgage loans on the primary market is not  refundable if the  property is located in the regions adjacent to the  city of Yerevan -  Aragatsotn, Ararat, Armavir and Kotayk. From  January 1, 2029, tax  refunds will no longer apply in other areas.  Restrictions will not  apply to border settlements.

In addition, for mortgage transactions from January 1, 2025, the   total amount of refundable income tax to the substitute or   co-borrower cannot exceed 750 thousand drams per quarter.

According to the deputy head of the State Revenue Committee of the  Republic, Artem Smbatyan, in Jan- Sept 2023, the state returned  income tax to "mortgage holders" in the amount of 37.5 billion drams  (about $93 million). According to him, IT employees received 22.3% of  these payments or 8.3 billion drams, while civil servants received  about 3 billion or 8.2%.