Report from the First Forum of Affordable Mortgages
In 2022, to help Ukrainians find a home, the government launched the eOselya program, a financial instrument to support housing policy. This is how an affordable mortgage appeared for those who want to live and work in Ukraine. In 2 and a half years, eOselya has helped to purchase housing worth more than UAH 25 billion. But the goal is to make mortgages available to even more people. The state, banks and developers are the key stakeholders in this endeavor.
on March 27 was held The first Affordable Mortgage Forum brought together representatives of the government, banks and developers. The participants discussed the development of the eHouse program, effective lending mechanisms and further prospects for the housing market in Ukraine.
Main sponsors of the forum: Royal House Group, Ukrainian Developers Association, Independent Association of Banks of Ukraine, SkyBank, UGB, PrivatBank, Oschadbank, Sensebank, Sheriff.
Panel 1: Current state and prospects of the housing market in Ukraine
Yulia Svyrydenko, First Vice Prime Minister, noted that eOselya has already helped to purchase more than UAH 25 billion worth of housing since 2022. Damage to the housing stock from the war is estimated at $83.7 billion, with 13% of the housing stock (over 2.4 million households) damaged.
"Restoration of the housing stock is the #1 task at the moment. The task now is to mobilize the financial resources of the state, international organizations and developers to stimulate the development of the real estate market. The impact of this program on the country's economy is very important. This includes a 23.8% increase in the production of construction products, an impact on GDP growth, and developers pay taxes, which means de-shadowing the market," Yulia Svyrydenko said.
Mykhailo Fedorov emphasized that the launch of eSelya via Diia has significantly simplified the process of obtaining a mortgage, making it available to Ukrainians in just a few clicks.
"You no longer need to collect documents and go to every office. While you sell the application, the backend automatically collects data from dozens of state registers and information systems. This means more than 300 fields of the application, which is generated in a few seconds," emphasized Mikhail Fedorov.
Bob Som, the World Bank's Regional Director for Eastern Europe, said that it is important for Ukraine to adopt appropriate laws that would facilitate the development of the affordable housing market.
"A strong housing sector can be a productive force for job creation and economic growth." Bob Som
Volodymyr Mudryi emphasized the potential of the banking system and urged banks to be more active in participating in the program, noting that the real increase in volumes is possible several times over.
The conclusions of this panel are that the state is now reorienting itself from a paternalistic approach, when the government buys apartments for citizens, to a market approach and will try to create conditions for the development of new opportunities. Various approaches and tools will be encouraged, including the spread of lease with a purchase option, financial leasing of real estate, housing subsidies, and anything that will make it easier for young families to get their own homes.
There is also a need to revise the approach to calculating the population's housing needs and take into account the emergence of new target audiences that are not typical for mortgages, such as veterans and IDPs.
"We at the Ministry of Veterans will continue to provide housing subsidies for veterans with disabilities of groups 1 and 2. 1,600 families have already taken advantage of the opportunity and more than 10,000 are in the queue. These veterans will choose inclusive housing that is adapted to their needs, and this must be taken into account in building codes," said Natalia Kalmykova, Minister of Veterans Affairs.
Interview on the stage "Mortgage Development Strategy of Ukraine"
The NBU's Kateryna Rozhkova believes that in order to expand coverage, the program's criteria should be revised to include mechanisms for interest rate compensation and war risk insurance.
"The most successful programs are those where the state is not a lender. Currently, eHousing mortgages do not correspond to market conditions in terms of rates, and therefore it is difficult to scale this program [...] Construction financing funds can be a good effective tool, but before that, it is necessary to review the regulation of developers, compliance with building codes, and preventive measures that would prevent the risk of unfinished buildings. Developers are now essentially lenders because they sell mortgages in installments. All regulations in the niche should be in line with European requirements," says Kateryna Rozhkova.
Panel 2: International experience in supporting the mortgage market
Luca Bertalot, Secretary General of the European Mortgage Federation (EMF), noted that the mortgage market has always been an engine of the economy, historically used to attract investment after major crises, such as after World War II in Germany and Spain.
Olena Voloshyna, Head of the International Finance Corporation (IFC) in Ukraine, emphasized that for obvious reasons, it is difficult for IFC to finance developers and construction companies. therefore, Ukraine needs to change its legislation to implement complex international financial instruments.
The speakers emphasized that the judicial reform should be completed as a priority and the issue of protecting the rights of homeowners should be resolved. Because property is not absolute, the mechanisms of collective management of their property are imperfect, and the mechanism of eviction from rented housing is in the gray area.
"There is no major international developer in Ukraine today. For 30 years of independence. This is a symptom of previous mistakes. We need to fix it. Establishing the right rules of the game will be the key to ensuring that we can get rapid growth in mortgages," said Artem Shevalev, member of the EBRD Board of Directors.
Panel 3: How to create an efficient mortgage market
The experts discussed the need to create a Housing Completion Guarantee Fund and to implement financial literacy programs. The banking community emphasized the importance of digitalizing processes and developing new insurance products.
"The digitalization of mortgages is a very good direction. Because the main target of mortgages is now the 18-35 age group. This is the generation that is used to receiving all services in the digital world," said Dmytro Musienko, Member of the Management Board of PrivatBank.
According to representatives of the banking sector, they are ready to assist developers in the development of construction and offer tools to mitigate risks so that there are no situations in which the developer may go bankrupt and not complete the houses. Insurance products could help. Banks that lend to the primary market have developed their own accreditation mechanisms for developers and pay attention to the names and reputation of companies. In general, they agree that all ideas should be implemented now that the development niche is voicing its readiness to act efficiently and transparently.
Previous scandals with unscrupulous developers were also discussed.
"Today there are three key risks: 1) the risk of non-completion or the risk of bankruptcy of the developer, 2) the risk of fraud, and 3) the reputation of the developer itself in the market. Banks have learned how to deal with the latter two. However, there are no tools to deal with the risk of unfinished construction. Here, the state must develop investment mechanisms and transparency, as well as ensure the protection of investor rights. There should be an analysis of the developer and an escrow account, which is used by the entire civilized world. The state should also control the construction process," said Orysia Yuzvyshyn, Director of Mortgage Lending Development at Sense Bank's Credit Products Department.
One of the ideas was to prohibit individuals from investing in unfinished projects so that banks could do it instead and then use mortgage loans to pay off payments to development companies. However, the speakers agreed that it is impossible to avoid all risks, as with any investment.
"If we talk about the drivers of construction, we believe that it should be possible to buy objects that have basic repairs immediately. Because our lenders say, 'If I take out a loan, I want to move into this apartment right away,'" said Oleksandr Shcherbakha, Deputy Chairman of the Board of Ukrgasbank.
Panel 4: International cases of affordable mortgages
The examples of Japan and Canada were used to examine how countries have addressed housing crises through comprehensive programs and public-private partnerships.
Orkhan Aliyev (Habitat for Humanity) noted that due to the consequences of the war, Ukrainians may more often choose to rent housing instead of buying it, as it is less risky.
"To deal with the aftermath of the banking crisis in Europe in 2008, we set up a market committee and brought all the players to the table together to reach a consensus. In Ukraine, the task now is not only to restore what has been lost, but also to transform the existing housing stock into something better," Luca Bertalot, EMF.
Panel 5: Impact of affordable mortgages on the construction industry
This panel was a key one for us, so we invite you to read more about it at the link below.
Panel 6: From application to key - successes of eSelya
Experts noted the effectiveness of digital technologies in the eHouse program, which allow Ukrainians to understand whether they can get a mortgage in a matter of minutes.
Automation of the secondary market is challenging because of real estate valuation. The primary market is much easier. But still, people invest a lot of time in choosing an apartment because it is a significant life decision.
"Our bank did not have a similar product. Therefore, we faced a double challenge: to create the product itself in a short time and to digitize the application process, integration with Diia and scoring model services as much as possible. We have created an entire ecosystem that allows you to make an "emotional" home sale in 1 hour," Volodymyr Chornenkyi, SkyBank Board Member.
Conclusions of the Forum:
- The state mortgage program "eOselya " is the main driver of the primary real estate market during the war;
- Clear legislative decisions and additional financial mechanisms are needed;
- It is necessary to introduce war risk insurance, create a Fund for Guaranteeing Completion, and update the eHouse criteria;
- The experience of international partners is key to the development of the mortgage market in Ukraine;
- There is a problem of low availability of apartments with basic repairs (whitebox), as they are more expensive and do not meet the program's limits;
- Developers are proposing a more active partnership with banks (as in the EU), including joint financing of construction;
- Ukrfinzhytlo and the Ukrainian Association of Developers signed a memorandum to create a unified digital platform to simplify accreditation processes and attract more quality housing to mortgage programs.
