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. Last Updated: 07/27/2016

Moscow City Takes Steps Toward Mortgage Program

Moscow city authorities approved Tuesday a proposal for a mortgage program that it says will allow residents to buy new homes.

Vladimir Shternfeld, the first deputy head of the city development department, said the 10 to 20 year mortgages will be issued with a 13 percent annual interest rate.

The program will begin in September, with 10,000 credits being extended to homebuyers during the first year. In five years, the number of loans is expected to increase to 40,000 a year.

The city plan proposes the establishment of a Moscow mortgage agency with branches at each prefecture to buy loans from authorized commercial banks and sell them to residents.

The Moscow city government will hold a controlling 51 percent stake in the agency, with the remaining 49 percent sold to foreign investors.

The proposal also calls for the formation of an insurance company and a realty agency.

Seven or eight Russian and foreign banks will participate in the lending program.

Financing talks are already under way with Inkombank, Mosbiznesbank, Mosstroiekonombank and the Bank of Moscow.

Moscow initially plans to draw more than $500 million in loans from major foreign banks. In a couple of years, the system will become self-supporting, with the Moscow mortgage agency issuing securities and placing them on domestic and foreign markets.

Moscow Mayor Yury Luzhkov said, however, that the city-backed loans are only for residents in the capital.

It was unclear whether the loans would only be available for new, inexpensive housing, of which there is currently a glut in Moscow.