KfW BANK TO PROVIDE A TOTAL OF 12 MLN EUROS FOR DEVELOPMENT OF
MORTGAGE MARKET IN ARMENIA
YEREVAN, MARCH 23, NOYAN TAPAN. The KfW Bank (Germany) will provide a
total of 12 mln euros for the development of the mortgage market in
Armenia. This year the KfW Bank will allocate the first share of this
amount – 6 mln euros under the credit program on development of stable
market of house financling in Armenia, while the program will be
implemented from the second quarter. The agreement on this was signed
on March 23 by the Deputy Chairman of the Central Bank of Armenia
(CBA) Artur Javadian and KfW representative Reinald Schtraus. To
recap, the intergovernmental agreement on the program was also signed
in March 2006. R. Schtraus stated at a press conference following the
signing ceremony that the main purpose of the program is to make
mortgage crediting accessible to a large section of the
population. According to A. Javadian, the program’s credit resources
are repayable over 40 years and carry an annual interest rate of
0.75%. Besides this credit, Armenia will be given a 1.5 mln euro
grant, which will mainly be aimed at advisory services. In the words
of A. Javadian, the program’s implementation will allow to introduce
the “minimum quality standards” of mortgage crediting in the Armenian
banks and credit organizations in the next two years. Thus, the main
terms of credit provision, including repayment dates and the
approximate amount of prepayment, will be specified. After that – by
mid 2008, the prerequisites will be created for the formation of the
secondary mortgage market and the issue of mortgage bonds.
It was noted that in 2007, at least 6 organizzations must be able to
provide mortgage loans in Armenian drams for a repayment period not
less than 10 years. Only 3 Armenian banks now offer mortgage credits
for 10 years. At the present time, the mortgage crediting portfolio of
the Armenian banks amounts to only 12 bln drams (about 27 mln USD),
with the annual interest rates of their credits making 11-17%. The
Armenian representative of the KfW Bank Karapet Gevorgian said that
the mortgage portfolio of the Armenian banks needs to be at least
doubled in 2008: in two years the demand on this market will make
about 150 mln USD. It was noted that the introduction of the
program-envisaged new credit technologies and international standards
of risk management in the banks will be conducive to an increase in
the mortgage crediting volumes and the improvement of terms. In
addition, the CBA will provide the resources allocated by KfW to the
Armenian banks at relatively low interest rates. According to K.
Gevorgian, these banks find a 4-5% margin as satisfactory.