ARKA News Agency – Interview
May 28 2004

WE WANT TO HELP PEOPLE TO BUY HOUSING

Exclusive interview of Robert Galstyan, the Chief Director of First
Hypothec Company, to ARKA News Agency.

ARKA-Being a universal credit organization, what kind of crediting
does First Hypothec Company do? What criteria are you guided with for
this?

R.Galstyan – As of today, First Hypothec Company grants three kinds
of credits: hypothec, consumer, and commercial ones. We put the
emphasis on granting credits for the purposes of purchasing real
estate. Initially, funding in Yerevan is planned, and then -in
regions. Credits are granted for 4-7 years at 12 -14% depending on
the sum of fore-payment, the state of housing, and other parameters.
The amounts of fore-payments are set beginning from 30%. Besides, we
grant consumer credits, in particular, for purchasing cars. We hold
negotiations to find partners among legal entities that are engaged
in distributing processes in Armenia. The conditions for crediting
are as follow: 18% -20% of annual rate. The third kind of credits
granted is business- credits. With regard to criteria for crediting,
they first of all propose for maximal information about a loaner to
ensure return of a credit and to minimize risks in this respect.

ARKA – How productively may hypothec market develop in Armenia?

R.Galstyan – It’s clear that in the conditions of developing economy
we have a lot to do. In particular, we have to create classical
hypothec market with low interest rate and grant credits for 25-30
year-term for paying them off. Economy itself dictates that certain
financial means may be assigned for crediting real estate. At the
initial stage we plan to grant credits for 7 years, but in future we
will prolong the period to 10 years. Most likely, it will be possible
to do already next year. With regard to effective development of
hypothec, the legislative amendments to be made are very important,
as they will regulate the field, as a consequence of that risks rate
will decrease and less expenditures will be spent connected with
transactions. It will allow prolonging the terms for crediting that
are not enough but are quite good for the conditions in Armenia.

ARKA – How can growth of prices on real estate influence on demand?

R.Galstyan- Of course, we trace tendencies, since the prices on real
estate are closely related to our business. I think that the prices
will get stable. I think that they will reduce within 30% that we
anticipate as fore-payment. According to the international
experience, the tendencies changes on the real estate market take
place every 20-25 years, and this stimulates the development of
hypothec business. In our case, we shouldn’t neglect the factor of
artificial increase of prices in Yerevan.

ARKA- How can you explain the recent agiotage about the real estate
market in Armenia?

R.Galstyan – First of all it should be noted that the interest in the
market is caused by the situation in the country. The factor of
stable growth of economy for the recent years caused interest of
businessmen to hypothec market. We can fix today rapid growth of
construction works in the capital. Besides, with improvement of life
conditions, certain strata of the society either buys new apartments,
or changes the old ones for new more comfortable apartments. We think
that our potential clients are among such people.
ARKA – Are there any calculations on the growth of demand?

R.Galstyan- We have no such calculations. But I can say that the
conditions for crediting that we have would satisfy at least 5- 7
thsd clients.

ARKA- The issue of hypothec attracts a lot of attention nowadays in
Armenia. In particular, CBA proposed legislative initiative, and
there is an interest in it on the part of banks and international
organizations. How do you position yourself in such conditions?

R.Galstyan – We do not aim at competing with banks regarding
crediting. The market development will show the efficiency of the
product we offer. The company has stable resources, and we hope that
we will use them. It’s not a secret for anybody that the owner of the
company is a non-resident. As of today, our capital amounts to $300
thsd. and will be brought to $600 thsd till the end of 2004,
according to law on credit organizations. We plan to increase the
capital to $1,5 mln during 2005.

ARKA – What can hypothec development stimulate in Armenia?

R.Galstyan – Of course, first of all legislative amendments are
necessary. As it’s known, there are already some legislative
initiatives in that area and they are considered in the Government.
The support of the RA President and CBA Chairman is very important in
this case. Systematized information about an apartment fund is also
very important, and such kind of info is very difficult to get. The
issue is not only is an apartment estimation. There is very little
info about the technical conditions of apartment blocks. Though the
Cadastre of real estate does some steps in this direction but they
are not enough. More stable basis for systematization is necessary.

ARKA – Does the company have any contacts with realtor organizations
and insurance companies?

R.Galstyan – We hold negotiations with some realtor companies that
would provide with services when real estate estimation. Such policy
of insurance and reliable partners in this area are very important
for us. At present, we hold negotiations we two insurance companies,
namely: London-Yerevan and Efes. It’s not excluded that we will
co-operate with both of them.

ARKA – And what about banks?

R.Galstyan -We co-operate with Armeconombank and HSBC Bank Armenia.
Most likely Unibank will joint hem. Our work is very specific, we
sell a type of a banking instrument not being a bank and are willing
to have the banks as our partners.

ARKA – Is the First Hypothec Company going to issue hypothec
securities?

R.Galstyan – It’s a very interesting question. But positive answer to
that question may be given only after the securities market develops.
People should first of all trust in securities. There is no doubt
that the development of this market will by 100% improve the
conditions of hypothec from the standpoint of the terms of crediting
and reduction of interest rate.

ARKA – What’s the main goal of First Hypothec Company on the hypothec
market?

R.Galstyan – We want to help people to buy housing at possibly low
prices. Of course, we are interested in it. We try to find our niche
and try to give our clients the possibility of choice. –0–