UPDATE 3: Putin orders govt to approve 6.5% mortgage plan by May 1

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MOSCOW, Apr 23 (PRIME) -- Russian President Vladimir Putin ordered the government on Thursday to approve a 6.5% mortgage program until May 1, according to a statement on the Kremlin's website.

"In the framework of construction industry support, the government of the Russian Federation shall… ensure approval of a reduced rate mortgage program, in the framework of which Russians are to be given mortgages of up to 3 million rubles for new housing until November 1, 2020, for up to 8 million rubles in Moscow, St. Petersburg, the Moscow and Leningrad regions at a 6.5% rate for the entire duration of the credit," the order read.

According to Prime Minister Mikhail Mishustin, the measure would draw at least 900 billion rubles to the construction industry from the banking sector. "This measure will help attract at least 900 billion rubles additionally to the housing construction sphere from the banking system," the official said.

Deputy Prime Minister Marat Khusnullin told channel Rossiya 24 that he estimated the cut-rate mortgage program to bring 500 billion rubles to the construction industry. "The key support measure is, of course, compensation of the mortgage rate. It has a big multiplication effect. This effect will draw about 500 billion rubles to the industry, very big money," the official said.

According to Khusnullin, state support of the construction industry in 2020 would amount to 98 billion rubles.  The cut-rate mortgage would require about 6 billion ruble budget subsidies in 2020 and 80 billion rubles over the entire period.

He added that it was too early to forecast bankruptcy of construction companies.

Construction Minister Vladimir Yakushev told channel RBC that more than 200,000 families will be able to use the mortgage program. He added that a long COVID-19 epidemic would trigger a housing price rise. "Everything depends on the length of the stagnation period," the minister said.

According to Yakushev, the situation is unlikely to cause acquisition of the majority of smaller companies by large ones.

Khusnullin said that the launch of cut-rate mortgage program is to keep demand for mortgages at the level of 2019.

Putin also ordered to provide 50 billion rubles of state guarantees to national housing development institution DOM.RF to buy housing from construction companies. The order includes a stipulation on an increase of the fund for shared-equity housing buyers' rights by 30 billion rubles.

Khusnullin said that the shared-equity housing buyers' rights fund increase would help finish construction of about 1 million square meters of troubled housing projects.

The president ordered the government to give state companies the right not to fine the companies fulfilling construction contracts until May 1.

Mishustin was ordered to consider putting the construction industry on the list of most affected sectors until May 20.

He said that retention of jobs was one of the key challenges for the industry with about 15 million employees. According to Khusnullin, the construction companies working in Moscow and the Moscow Region, have recently been allowed to continue construction projects.

(77.0416 rubles – U.S. $1)

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