In the near future, we can expect a gradual increase in the number of developers accredited under the єOselya program, as well as sufficient grounds for the active development of partnership agreements between developers and commercial banks as another effective tool for the development of mortgages in the primary housing market. This was stated by Elena Dmitrieva, First Deputy Chairman of the Board of Globus Bank.
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According to the Ukrainian Financial Housing Company (Ukrfinzhilye), at the beginning of March the number of developers accredited to participate in state mortgages already amounted to 27 companies from 13 regions (64 objects, taking into account both individual residential complexes and individual sections-houses within the residential complex).
According to Dmitrieva, in the next 2-3 months the involvement of developers in the “Eoselya” program may become more noticeable :
- Firstly, development companies have clearly realized the need to improve their own sales mechanisms, as required by the conditions of participation in the state mortgage program, such as the use of construction financing funds, the mechanism for the purchase and sale of property rights, and the sale of targeted bonds. Secondly, the sale of apartments is already underway in the objects, the construction of which began after the entry into force of the Law of Ukraine “On the Guarantee of Property Rights to Real Estate Objects that will be Built in the Future” dated August 15, 2022, which coincides with the principles of the “Oselya” program » on the primary market. Thirdly, installment programs and two mortgage mechanisms, namely the state “єOselya” and partnership programs with banks, significantly expand the ability of developers to attract potential buyers, which may become one of the factors increasing demand in the primary housing market.
Basic requirements of general mortgage programs of banks and developers
To obtain bank accreditation and implement joint mortgage programs with developers, the following requirements must be met:
- Active construction (dynamics of construction work in real time) of the residential complex proposed for accreditation. The development company has all permits confirming the legality of construction. Absence of any legal encumbrances that may affect the dynamics of construction. The state of readiness of the facility is at least 30% with clear deadlines for completing construction and putting the facility into operation. The sale of apartments should take place through construction financing funds, a mechanism for the purchase and sale of property rights, and target bonds. Compliance of the object with the declared quality characteristics and class of housing. Experience in the market (portfolio of ongoing projects), openness, professional and business reputation of both the company and its managers.
The accreditation process is, first of all, confirmation by the bank of the financial and technical ability of the developer to fulfill its obligations to investor-buyers, as well as the compliance of the object with the declared quality characteristics. In fact, the bank takes on part of the developer’s risks, guaranteeing buyers the safety of purchasing a home in a particular residential complex.
What are the advantages of a mortgage in the primary housing market
The main advantage of a mortgage on the primary market still remains the opportunity to purchase modern, high-quality housing at a price on average 25-30% lower than in an already built residential complex, because usually new apartments are more expensive due to a significant reduction in risks for buyers. In addition, the mortgage agreement actually “fixes” the price and protects the buyer from an unwanted increase in the price of the purchased apartment in the event of a depreciation of the national currency.
I note that since the beginning of 2024, on the primary market, the greatest demand for the purchase of housing with a mortgage (about 70% of all transactions) has been observed for 1.2-room apartments with an area of 45 m2 to 70 m2 with a total cost of UAH 2 million to UAH 3 million UAH Moreover, in the vast majority of cases, transactions are concluded for a period of up to 20 years with a down payment of 30% of the cost of the house.
Besides the price and area of the house, several qualitative characteristics of the residential complex are also important for potential borrower-buyers:
- safety of residence (location, region and city); the presence of self-sufficient infrastructure (recreational, children's, social, sports, etc., the presence of spacious parking lots); convenient location taking into account transport links; safety of living in the residential complex itself (24-hour security, territory closed from outsiders); the presence of recreational areas near residential complexes (for example, parks, forests, lakes).
Since the beginning of the year, the trend of “quality competition” of residential complexes has gradually resumed on the primary market, which is a good sign for the construction market, and then developers will have to concentrate their efforts not only on construction time, sales volumes, expanding acquisition opportunities, but also on creating truly comfortable and modern housing.
What influences the development of mortgage lending
According to Dmitrieva, in the second quarter the main factors on which the development of mortgages in the primary market will depend will be:
Rhythm of receipt and sufficient volume of macro-financial assistance to cover current state budget expenses (stability of the national currency, which encourages the NBU to further reduce the discount rate). Development of the economy and, in particular, the construction industry through the active involvement of construction and development companies in the restoration of the country. Active development of credit and deposit banking programs: increased competition for clients. “Military” factors: overcoming the consequences of aggression, the situation at the front. Socio-political factors: social unity, transparency of decisions and actions of the authorities.It is expected that from April to June 2024, on the primary market under the eOselya program and joint mortgage programs of banks and developers, a total of up to 200-250 mortgage transactions for a total amount of up to UAH 500 million can be concluded. At the same time, about 80-85% of mortgages will be issued in Kiev, the Kiev region and some regional centers, mainly in the western regions.
Under favorable economic, political and military conditions, a further adjustment of the discount rate can be expected already in the second quarter – from 14.5% to 14-13%.
“Of course, commercial banks are already exploring the possibility of reducing mortgage rates: depending on the term and size of the down payment, they can decrease to 5-17% per annum, which can be considered a positive signal for future home buyers on the primary market who will decide to take advantage of both state mortgages and common mortgage programs with developers,” noted the First Deputy Chairman of the Board of Globus Bank.