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%.
