Interview with Gevorg Manukyan, Head of Mortgage and Auto Lending Department of "Ameriabank" CJSC
Mortgage lending conditions are improving, lending programs with preferential terms are increasing. Knowing about the special conditions, some are in a hurry to take a loan, while others prefer to wait. maybe it will be possible to take advantage of a lower interest rate and more favorable terms. How justified is the wait, what will happen next: will interest rates continue to fall or will real estate prices rise?
The demand for mortgages is definitely increasing, and this is due to several factors. There is activity in the real estate market. along with the increase in the number of transactions, the volume of mortgage lending also increases. The second factor is interest in real estate as an investment tool. Third, and perhaps no less important, is the government's income tax refund program aimed at paying off mortgage interest. The majority of housing transactions are carried out in the primary market, which is certainly facilitated by the ability to pay off interest at the expense of income tax.
The real estate market and the mortgage lending market are closely related and the growth of one contributes to the growth of the other. In the last year and a half, people who live and work abroad and are not even citizens of Armenia have become more interested in Armenian real estate. We also have such clients. In this case, we can say that this interest has increased due to the general favorable environment of the country.
According to statistics, the number of transactions increases, which, according to the law of supply and demand, leads to an increase in prices. The increase in real estate prices in Armenia is a fact, but the market is not stable and both increases and decreases are expected. Demand is quite high at the moment, so prices are still rising.
In the near future, I predict a steady increase in demand, for which there are objective prerequisites. For quite a long time, mass construction was not carried out in Armenia. But we need new buildings that will meet the modern standards, the requirements of the new generation. People's needs have changed, young families strive to separate themselves, moreover, to provide each of the children with a separate room. The requirements for quality indicators of the apartment have changed. Perhaps all this leads to a sustained high demand.
As for the change in mortgage lending conditions, that process is continuous. Money is also a market commodity that can go up and down. As of today, mortgage interest rates are not increasing, and sometimes even decreasing. A number of government interest subsidy programs are in place, and competition between banks helps stabilize interest rates with little variation. I would not make long-term predictions about interest rates and real estate prices.
One of the ways to avoid overspending on interest is to refinance the loan, which can be used if the interest rate at another bank drops. Are such programs in demand?
Mortgage lending is mostly carried out with a floating interest rate. depending on the market situation, the interest rate may increase or decrease. Of course, this is a risk for the buyer, but the bank bears the same risk if the interest rate drops. Interest rates tend to decrease in recent years, which indicates serious competition in our market. In any case, if at any moment the client is dissatisfied with the interest rate, he can refinance the loan with more favorable terms through another bank. Moreover, in the case of rising real estate prices, it is already meaningless to talk about overspending.
To be honest, I was extremely surprised when I read the mortgage lending statistics. In just a year and a half, Ameriabank recorded a rapid growth of the mortgage portfolio and became the market leader. What is the secret of success? What kind of conditions does Ameriabank offer, how do they differ from competitors?
Experience shows that customers need long-term, "quick" loans with favorable terms and controllable risks. Quality of service is also important to customers.
Since today the real estate sector is developing at the expense of the primary market, cooperation with developers is very important for us. We decided that in order to meet the needs of both the buyer and the seller, it was necessary to ensure the effective cooperation of all parties. The main participants in the market are the developers, and with some of them we have reached an agreement to finance the acquisition of apartments in the buildings under construction by them under certain conditions. For the buyer, this became a risk management tool.
I would like to digress here and explain why this is important. When we say that the real estate market is growing at the expense of the primary market, it means the following: the buyer is paying for an apartment that has not yet been built. The law provides for such an opportunity. According to the RA Civil Code, until the apartment is built, the buyer acquires the right to purchase. The law also stipulates that the developer transfers the proceeds from the sale of future apartments to a special account. The developer receives these funds only after the title of the apartment is transferred to the buyer, unless the buyer allows the developer to use a portion of the funds. In fact, it is this account that ensures the right of the buyer to get an apartment. This is a very important fact that many people do not take into account. Buyers are not always aware of the risks involved in purchasing an undeveloped home and how those risks can play out in force majeure situations. Yes, market trends are positive, but at the same time, we should not forget about possible risks. In addition, an additional incentive for the developer is that there is money in the account, which he will not be able to use until he finishes the construction. And what do we do? We take a lien on that specific developer account while working to preserve the buyer's right to it as much as possible. In this way we minimize the buyer's risks, which is one of our important advantages. We always insist that the contract clearly defines which part of the funds available in the special account can be used by the developer and which cannot. I urge everyone who wants to buy real estate, regardless of whether they use our services or not, to read their contract carefully.
I should mention that Ameriabank's interest rates are not the lowest in the market, the loan terms are not the longest, but the product we offer is perhaps the most versatile in the market: quality service, simplified paperwork, the best price-quality and term-interest rate ratio, quick decision making on the loan. This is why people turn to us. on average, we provide mortgage loans of 3 billion AMD on a monthly basis.
Our terms are very simple and clear: a certain interest rate, without additional service fees. We do not require insurance of the mortgaged property, accident insurance - all of that is carried out by the bank at its own expense. We have simplified many processes, standardized the requirements, created mechanisms that allow us to approve the loan in any branch with an accelerated procedure. If the client is solvent, his application is approved in a few days.
Soon, we intend to introduce an online platform where customers will be able, based on their needs and financial capabilities, to choose the apartment they are interested in from the available options and apply for a loan online, which will speed up the process even more.
The favorable lending conditions also have the opposite side: very strict requirements are presented to the borrower and the property. Will the average borrower be able to use Ameriabank's mortgage loans?
Our main requirement is solvency - the availability of sufficient income to repay the loan. We have abandoned the approach where the value of the collateral is more important than the solvency of the client. I should mention that some borrowers have misconceptions about lending. the first is that solvency is not important if there is collateral, the second is that banks aim to expropriate the client's property. Let me emphasize again that the banking business is not the sale of collateral. Banking business is making loans and making profit from it. And this means that if the loan is repaid on time, the bank will only profit and provide these funds to another client. Let's agree that this is much easier and more profitable than the hassle of selling even the most expensive and quality property.
At the same time, it is important for us the quality, location and location of the property, liquidity, regardless of the loan-collateral ratio.
We have a very flexible prepayment policy. The down payment can be 10% of the apartment value if the apartment is in a newly built building. Combining all the conditions, we get a very interesting offer. For example, if the customer wants to take a loan for 20 years to buy an apartment worth 25 million AMD, the advance payment will be 2.5 million AMD, the average monthly repayment will be around 240 thousand AMD. If the family's total documented income is 500-600 thousand AMD, they can afford to buy that apartment. And for 25 million AMD you can buy a 2-3 room apartment in the new buildings of Yerevan today. Most of our deals are concluded in the middle price segment.
Does Ameriabank prefer to lend for the purchase of apartments in newly constructed buildings?
We prefer to credit what our customers choose. We finance the acquisition as well as the development of various classes of real estate. But in any case, the purchase of an apartment is much more affordable, so the demand is concentrated in this segment. And we are where our customers are.
I think that the main change in the real estate market in the future will not be the construction of individual buildings, as now, but of new districts. Such districts, each of which will have its own infrastructure, in which all conditions will be created for residents. Housing construction is also developing in marzes. new apartment buildings are being built, and we also plan to finance the acquisition of apartments in these buildings.
I would also like to mention that a lot has changed in the country, people are optimistic and if you have noticed, active construction is going on everywhere in Armenia. And that means that people see the future of themselves and their children in Armenia.
Source: news.am