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ARMENIA: SUBSIDISED MORTGAGES STILL TOO COSTLY FOR MOST
By Gayane Asryan
Institute for War and Peace Reporting
IWPR Caucasus Reporting #667
Dec 3 2012
UK
Officials say reduced-rate loans are the best the government can do
to help first-time buyers at the moment.
A programme to help young families in Armenia acquire their first
homes has been running for nearly three years, but potential buyers
complain that it is expensive and bureaucratic.
Since the scheme was launched in January 2010, about 950 families
have used it to buy properties, about half of them in Yerevan.
The programme requires young couples to come up with a deposit of
30 per cent of the purchase price in the capital Yerevan, or ten
per cent elsewhere. The government subsidises the mortgage rate by
two percentage points in Yerevan and four elsewhere. Despite this,
however, the interest rates are high by Armenian standards, at 8.5-9
per cent in the capital and 6.5-7 outside it.
Both the deposit and the mortgage payments are a deterrent to many
potential buyers.
"At first, the programme looked like a life-saver, but in practice it
was problematic because of the size of the deposit. We had to ask our
parents for 12,000 [US] dollars so that we could pay the 30 per cent
deposit," said Liana Yeghiazaryan, a 31-year-old journalist in Yerevan.
Nvard Zakaryan, a 26-year-old working in the tourist industry, said,
"A couple on an average salary should steer clear of it, since it
creates the misleading impression that if you scrape together the
funds, you can take out a mortgage. But if you do, you won't be able
to survive and pay off 250,000 drams [620 dollars] a month."
Zakaryan said the banks had refused her a mortgage under the programme
because she did not earn enough.
"When they found out how much my boyfriend and I earned, three banks
refused to give us credit, saying that a [combined monthly] wage of
240,000 drams wasn't enough for the scheme," she said. "The programme
is supposed to be designed for young people on an average salary,
which in Armenia is 120,000 drams. Why didn't they make it clear this
is actually a programme for families on high salaries?"
Deputy Finance Minister Varden Aramyan conceded that the scheme was
unaffordable for many young families.
"However, you have to recognise that even in the current conditions,
there are a lot of people who want to take part," he added.
Other officials said they doubted there was a viable alternative.
"The programme isn't ideal, of course, and it could never have been,
since it was always going to be a loan scheme albeit with lower
interest rates," Armen Papyan, head of the youth policy department at
the ministry for sport and young people. "That means a young family
has to have a stable monthly income, plus disposable income to repay
the loan. At the moment, though, this is the best way the government
has of tackling the problem."
Papyan advised couples to demand a written statement from banks that
refused them loans, so that they could appeal against the decision.
One difficulty that Zakaryan and others have come up against is that
friends, neighbours and extended family members used to be accepted
as guarantors of the loan, but the rules have been changed so that
only parents, aunts or uncles are allowed.
"This creates more problems - we had wanted my godfather to act as
guarantor," Zakaryan said.
Another problem is that couples are only eligible to join the scheme
if their combined age is under 60. the average age of marriage is
rising in Armenia, to 28 for men and 25 for women.
Naira Nersisyan, 27, got married last year, and she is still living
with her husband's family.
"Our monthly income is about 400,000 drams [1,000 dollars]. We did our
best to get on the scheme since it would have allowed us to buy a flat
at a better price than on the open market. But it hasn't worked out.
Our combined age is over the set limit."
Nersisyan said some bank staff had hinted that they would overlook
the age issue in return for a bribe, but she said, "My husband is
highly principled, and no matter how hard I tried to persuade him not
to rule out that option, he was resolved not to pay a penny in bribes."
Gayane Asryan is a reporter with eMedia.am in Armenia.
http://iwpr.net/report-news/armenia-subsidised-mortgages-still-too-costly-most
By Gayane Asryan
Institute for War and Peace Reporting
IWPR Caucasus Reporting #667
Dec 3 2012
UK
Officials say reduced-rate loans are the best the government can do
to help first-time buyers at the moment.
A programme to help young families in Armenia acquire their first
homes has been running for nearly three years, but potential buyers
complain that it is expensive and bureaucratic.
Since the scheme was launched in January 2010, about 950 families
have used it to buy properties, about half of them in Yerevan.
The programme requires young couples to come up with a deposit of
30 per cent of the purchase price in the capital Yerevan, or ten
per cent elsewhere. The government subsidises the mortgage rate by
two percentage points in Yerevan and four elsewhere. Despite this,
however, the interest rates are high by Armenian standards, at 8.5-9
per cent in the capital and 6.5-7 outside it.
Both the deposit and the mortgage payments are a deterrent to many
potential buyers.
"At first, the programme looked like a life-saver, but in practice it
was problematic because of the size of the deposit. We had to ask our
parents for 12,000 [US] dollars so that we could pay the 30 per cent
deposit," said Liana Yeghiazaryan, a 31-year-old journalist in Yerevan.
Nvard Zakaryan, a 26-year-old working in the tourist industry, said,
"A couple on an average salary should steer clear of it, since it
creates the misleading impression that if you scrape together the
funds, you can take out a mortgage. But if you do, you won't be able
to survive and pay off 250,000 drams [620 dollars] a month."
Zakaryan said the banks had refused her a mortgage under the programme
because she did not earn enough.
"When they found out how much my boyfriend and I earned, three banks
refused to give us credit, saying that a [combined monthly] wage of
240,000 drams wasn't enough for the scheme," she said. "The programme
is supposed to be designed for young people on an average salary,
which in Armenia is 120,000 drams. Why didn't they make it clear this
is actually a programme for families on high salaries?"
Deputy Finance Minister Varden Aramyan conceded that the scheme was
unaffordable for many young families.
"However, you have to recognise that even in the current conditions,
there are a lot of people who want to take part," he added.
Other officials said they doubted there was a viable alternative.
"The programme isn't ideal, of course, and it could never have been,
since it was always going to be a loan scheme albeit with lower
interest rates," Armen Papyan, head of the youth policy department at
the ministry for sport and young people. "That means a young family
has to have a stable monthly income, plus disposable income to repay
the loan. At the moment, though, this is the best way the government
has of tackling the problem."
Papyan advised couples to demand a written statement from banks that
refused them loans, so that they could appeal against the decision.
One difficulty that Zakaryan and others have come up against is that
friends, neighbours and extended family members used to be accepted
as guarantors of the loan, but the rules have been changed so that
only parents, aunts or uncles are allowed.
"This creates more problems - we had wanted my godfather to act as
guarantor," Zakaryan said.
Another problem is that couples are only eligible to join the scheme
if their combined age is under 60. the average age of marriage is
rising in Armenia, to 28 for men and 25 for women.
Naira Nersisyan, 27, got married last year, and she is still living
with her husband's family.
"Our monthly income is about 400,000 drams [1,000 dollars]. We did our
best to get on the scheme since it would have allowed us to buy a flat
at a better price than on the open market. But it hasn't worked out.
Our combined age is over the set limit."
Nersisyan said some bank staff had hinted that they would overlook
the age issue in return for a bribe, but she said, "My husband is
highly principled, and no matter how hard I tried to persuade him not
to rule out that option, he was resolved not to pay a penny in bribes."
Gayane Asryan is a reporter with eMedia.am in Armenia.
http://iwpr.net/report-news/armenia-subsidised-mortgages-still-too-costly-most