Polonsky Plugs Cheaper Mortgages

MTPolonsky, Wednesday at an investment forum, says lenders should give mortgages at 3 percent to 4 percent.
Mirax Group co-owner and chairman Sergei Polonsky said Wednesday that boosting demand for apartments, including with cheaper mortgages, could help Russia out of the crisis.

"There's no sense in building roads in times of financial turmoil, as it will yield results only after many years," Polonsky said on the sidelines of the Russia Forum. "Demand for apartments will have an immediate effect."

The construction industry has been among the hardest hit by the financial crisis, which all but closed foreign capital markets to Russian borrowers.

In September, Polonsky said Mirax had canceled the development of 10 million square meters of residential and commercial real estate because of soaring interest rates.

To help boost demand, Polonsky said Wednesday, banks should give out mortgage loans at 3 to 4 percent, well above the current average of more than 20 percent. The state has to finance such mortgages using the money of the Reserve Fund, he said.

Sberbank chairman German Gref said spending money from the stabilization fund to support mortgage programs would speed up inflation to as much as 30 percent, which would in turn send interest rates soaring.

"Fire can't be extinguished with gas," Gref said, adding that only state banks would continue to give out mortgage loans this year.

New support for the Agency for Mortgage Lending will lower mortgage rates to 11 to 15 percent, from 13 to 18 percent, agency head Alexander Semenyaka said Wednesday.