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. Last Updated: 07/27/2016

Mortgage Agency Calls For State Intervention

Federal and regional government bodies must intervene in the real estate market before accessibility to housing gets worse, said Alexander Semenyaka, head of the Agency for Housing Mortgage Lending.

Speaking to journalists last week about the agency's plans, Semenyaka said although average family income grew 20 percent last year, the average cost of housing rose 30 percent. Young families are unable to keep pace with the rising cost of living.

"If the government is unable to change this tendency, the country will have serious social and economic problems," he said.

He described the mortgage market as a macroeconomic instrument that should be under government control and called for more financing for the agency in order to make mortgages cheaper. In addition to federal financing, regional governments need to subsidize mortgages, he said.

The agency plans to seek a credit rating that will enable it to attract investors through mortgage bonds and provide ruble-denominated loans at an initial 18 percent interest rate. This is close to the lowest rate for the Finance Ministry's OFZ bonds.

The 2003 budget has allocated 4.5 billion rubles ($142 million) to guarantee the agency's bonds, but another 700 million rubles would allow it to drop its interest rate from 18 percent to 14 percent and make mortgages more accessible, Semenyaka said.

Semenyaka, who previously oversaw Gazprom's securities, was brought in to the agency this year to kick-start the agency, which has achieved little in the five years since it was created.

The agency has developed a two-level system for refinancing mortgage credits, working with programs that have sprung up in the regions in the last decade. The programs will be required to be at least 51 percent controlled by regional governments, with the mortgages themselves being issued by banks.

Foreigners will be able to receive mortgages, provided their income is in Russia, Semenyaka said.

The average cost of a home corresponds to a Russian family's overall income for 4 1/2 years. By comparison, homes in Western Europe cost on average three years' income, he said.

Semenyaka said another problem is that too few deals take place to prevent prices from being manipulated.

He said in the housing market, the average demand price is 5,000 rubles per square meter while the construction cost is 9,500 rubles per square meter, according to Gosstroi.

Georgy Dzagurov, general director of Penny Lane Realty, said the cost of housing is unlikely to change.

Speaking at the first annual European Construction Research Conference earlier this month, Dzagurov said housing development was quasi-monopolistic with construction carried out by old companies using old methods. It is difficult to expect lower prices in such circumstances, he said.