Putin says Russia has to reduce mortgage rate to 7% fast

MOSCOW, Jun 21 (PRIME) -- The Russian government has to ensure a swift decrease of interest on mortgage loans under the state program for low-interest mortgage to 7% as the instruments is becoming unaffordable, President Vladimir Putin said on Tuesday during a meeting of the State Council’s Presidium.

The average market mortgage rate exceeds 14%, and in April, mortgage provision shrank by 66.7% on the year. There are many other reasons for the mortgage lending to shrink, but the interest rate is one of them, he said.

“During the recent St. Petersburg economic forum, I asked the government to consider reducing the interest rate on the preferential mortgage loans to 7% from 9%. I request that the government work together with the Bank of Russia, the entire banking community, and the construction industry in order to implement the measure swiftly,” Putin said.

The authorities have to create a transparent and accessible register of demands and compliances for housing construction to reduce the time that companies have to spend on acquisition of construction permit from the current average time of two years. The government also should ensure construction of abandoned housing in the next two years, even if it demands additional financing, he said.

The government has to find ways to maintain the speed of construction in spite of the sanctions. Russia has to build several billions of square meters of residential area to solve its housing problems, and has to break the stereotypes and start investing in real assets like housing. Investment in housing and public utilities should also grow multi-fold, he said.

Putin also said that it was necessary to reduce the share of worn-out public utility networks in Russia each year, and the first stage of the program should be done in five years.

Deputy Prime Minister Marat Khusnullin said that more than 76 trillion rubles of non-budget investment is necessary for construction of 1 billion square meters of housing until 2030.

“The state housing program is the most capital-consuming. Construction of 1 billion square meters of housing requires over 76 trillion rubles of investment from individuals and private investors in a span of 7 years,” he said, adding that provision of 1 trillion rubles of budget infrastructure loans would ensure commissioning of 130 million square meters of housing.

The residential estate industry’s demand for construction materials in the next seven years stands at 80 trillion rubles, and Russia has to ensure production and imports substitution that covers the demand. The Construction, Housing, and Utilities Ministry should become a customer for materials and technologies, and draft a sub-program for development of the construction materials industry, he said.

Implementation of the strategy for the Russian housing construction and public utilities sector until 2030 will require around 160 trillion rubles of spending, of which about 30 trillion rubles are to come from the federal budget. The authorities should also use the money from the National Wealth Fund and from unused infrastructure loans, he said.

Under the strategy, around 260,000 kilometers of public utility networks are to be maintained and repaired, Khusnullin added.

In 2022, Russia should prepare city-planning decisions for building of 400 million square meters of residential estate, he said.

He also suggested that the government should discuss the idea of allowing developers to partially open their escrow accounts with banks and receive money from the accounts before they obtain a commissioning permit, which may speed up residential estate projects by up to two months.

The government’s goal for 2022 is to maintain the portfolio of mortgage loans at least flat on the year as compared with 2.5 trillion rubles issued in 2021, Khusnullin said.

The authorities also should approve a 5-year construction plan in 2022 and tie it to the transport goals. The baseline amount of federal financing should reach 1.1 trillion rubles. Introduction of a support mechanism for the secondary housing market is also worth discussing, he said.

(56.1727 rubles – U.S. $1)

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