You're reading: Government low-interest mortgages aim to help low-income Ukrainians

Ukrainian President Viktor Yanukovych is promising that the government will provide low-interest mortgages as a way to increase home ownership, especially among the poor, and to stimulate the sluggish housing market.

Yanukovych says the program will provide mortgages for up to 15 years at an interest rate of 2-3 percent only.

However, some see the program as a campaign gimmick ahead of the Oct. 28 parliamentary elections that, according to current polls, the pro-presidential Party of Regions will face a setback.

According to deputy head of Presidential Administration, Iryna Akimova, the government program has 1 billion hryvnias – or $125 million. Considering that banks are charging interest rates of 18-25 percent, the low-interest mortgages are a bargain.

The money might be enough to help families buy about 50,000 small one-room flats, says Pavlo Matiyazh, executive director of the Ukrainian National Mortgage Association. “We should understand that to make this program evolve, more funds should be raised,” Matiyazh said. “By comparison, at the moment, about 450,000 mortgages have been issued in Ukraine.”

Many people who own their apartments simply obtained the deed to the property after the collapse of the Soviet Union. Before mortgages became common, real estate prices were low and people had to come up with the entire purchase price to buy a flat.

Akimova, Yanukovych’s top economic adviser, said that the funds will be targeted to “socially disadvantaged people,” although details on who will qualify for the program have not been decided yet.

According to the State Statistical Administration of Ukraine, the average salary was about Hr 2,000 or $250, but considerably higher in Kyiv – Hr 4,000 or $500.

The income is not high enough to get a mortgage from a bank. Buyers would have to show a monthly salary of at least $1,000 to have a chance for a loan, said Oleksandr Sugonyako, president of the Ukrainian Banks Association.

Sugonyako wants to know the details of the presidential program.

“You must prove to the state that your financial situation is very bad and you need to offset the interest rate. On the other hand, you must appear in a state bank and say that your financial situation is well enough to take out a loan,” Sugonyako says.

Depending on the length of the loan, Vladislav Lukyanov, the deputy head ofthe parliament budget committee, said the government money can make owning a home even cheaper than renting one.

The money should also stimulate the economy, in particular the housing market, Lukyanov said.

At the moment, only about 12 banks in Ukraine are providing mortgage credits, according to Prostobank Consulting company. Many require down payments of up to 50 percent of the purchase price, with annual interest rates of 20 percent to 34 percent.

Irina Lukhanina, the head of the real estate agency Blagovest, says that half a year ago the number of mortgage loans slightly increased. “In our agency,inSeptember-October2011,14-16 percent of transactions were done with the help of a mortgage, and in the same period the year before the figure was only 3-4 percent..

According to the directorof the Kyiv office of Kredobank, Volodymyr Stavnyuk, banks have already completed their restructuring and will actively invest in mortgages.

"Unfortunately, during the recession of the economy in our country, there is a little much to invest. For us, strategically advantageous spheres are car loans and mortgage," Stavnyuk said.

The following are the average current price of prices on flats in the four Ukrainian cities hosting the Euro 2012 football championship, according to SV Development.

City

$ per square meter

Kyiv

1,800

Lviv

1,448

Donetsk

1,166

Kharkiv

1,055