Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Samara Lawmakers Pass First Farm Mortgage Bill

Samara is poised to become the first place in Russia where farmland can be mortgaged after the Volga River region's legislature sent a groundbreaking mortgage bill to the governor for approval.

Governor Konstantin Titov, who initiated the bill passed last week, will sign it into law within 15 days, a regional government spokesman said.

Experts said the complexity of the law would probably prevent it from being implemented quickly.

Local agricultural officials applauded the bill, saying farmers finally would be able to obtain loans to improve their impoverished plots. The Samara region has 3 million hectares worth of agriculture land of which 207,000 hectares belong to farmers.

"This provides a realistic opportunity for our farmers to take out bank loans," Irek Nuriyev, head of the Samara Farmers' Association said in a telephone interview from Samara. "It is definitely a very good and progressive law that brings us closer to being a civilized market."

Under the bill, the value of the property must be assessed before it can be used as collateral for a loan. A creditor gets rights to the land only if the borrower fails to pay off the loan or if he misses payments more than three times in one year. To claim the property, the plot must first be put up for sale at an open auction, which would require that the minimum bid be the predetermined value of the land.

The are no limits on the size of the plot that can be mortgaged.

Samara's mortgage bill comes at a time when federal lawmakers are still struggling to define Russia's land code, which gives Russians the right to own, use and dispose of land. No state law exists on the matter, although several other areas of Russia, such as the Saratov region and the city of St. Petersburg, have passed laws allowing the sale of land.

President Boris Yeltsin and his government strongly back land legislation, but the Communist-led parliament has blocked reforms.

"The State Land Committee is, of course, in favor of the introduction of a law that would allow the mortgage of agricultural land," committee spokesman Boris Grigoryev said. "This is the only way to start the turnover of Russia's agricultural land, most of which has been privatized."

Nuriyev of the Samara Farmers Association said that local farms are in dire need of investment. About 80 percent of the region's 3,500 farms were crippled by a devastating drought last year and 46.5 million rubles' ($1.87 million) worth of land was scorched by fires." They need money very much," Nuriyev said.

But, he added, even though the bill would soon be signed, this did not mean that it will be implemented quickly.

"We will have to explain to farmers how to use the law," he said. "Most of them are yesterday's kolkhozniki [collective farm workers] and have never heard of anything like this before."

"But the even bigger problem is the banks," he added. "They don't need the land. They would have to find buyers ... if the loans were not paid back," and doing so could be seen as too much of a hassle.

There are no banks in Russia specializing in land. Crisis-hit SBS-Agro is the main bank that extends loans to the agricultural sector through special government programs.

An SBS-Agro spokesman in Samara, Vladimir Bakulin, agreed that the mortgage law could not be quickly implemented.

"The law is the law, but not everything is that simple," he said. "What are these land plots, how liquid are they, and are they worth mortgaging?"

"We actually don't even have professionals in our bank who are able to make these assessments," he added. "I think it will take time."

He said SBS-Agro has received about 100 loan requests from Samara-region farmers this year but has not yet extended any credits.