Land goes out of pledge – Newspaper Kommersant No. 162 (7363) dated 09/05/2022
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Post Bank is launching POS loans (an unsecured loan for the purchase of goods, services from a bank partner) for land. Making such a loan is faster and easier than a mortgage. The land is not pledged to the bank and it will not be necessary to coordinate its further use. Until now, only Credit Europe Bank had such a product, but only in Moscow and the region, Post-Bank promises to cover the whole of Russia. However, experts doubt the success of the project, pointing to limitations and increased risks of default by borrowers.
As it became known to Kommersant, Post-Bank offered an alternative to a mortgage on land – a POS loan. It can be obtained for the purchase of a land plot from the bank’s partners (there are several thousand of them throughout Russia). The maximum loan term is five years, the amount is up to 7 million rubles. Post Bank confirmed this information. The loan rate will start from 6.9% per annum with insurance (without it – 14.9% per annum). For comparison, the average mortgage rate is 10.97%, the bank said. It is assumed that under the POS-lending program it will be possible to purchase any piece of land, including for farming. Unlike traditional mortgages, land does not need to be mortgaged.
Until now, the main way to purchase plots on credit has been either a mortgage with registration of land as collateral and other restrictions, or a cash loan, which is more expensive than the same unsecured, but targeted POS-loan. Only Credit Europe Bank has experience in implementing POS lending programs for land among Russian players, the product is still on the list of targeted loans. However, according to information on the bank’s website, it is available only in Moscow and the region. Other loan terms are not disclosed there. The bank did not respond to Kommersant’s request.
In comparison with a mortgage on land, a POS loan has a number of advantages: it is not required to register land as collateral, a loan is issued in one day according to two documents (passport and SNILS), says Andrey Pavlov, Vice President of Post Bank. “In addition, there are no restrictions on building a house on a plot; in a mortgage, the borrower can do this only with the consent of the lending bank,” he explains. “Also, the program does not have territorial restrictions and restrictions on the area of the land plot.”
However, experts interviewed by Kommersant doubt the success of the project. “We can hardly expect a rapid growth in the popularity of such lending, the product today looks like a fairly niche one,” notes Alexander Proklov, senior managing director of the NKR rating agency. agriculture looks more like a side, accompanying activity.
It can be assumed that such a product will find demand in regions with megacities and large cities, where suburban individual construction is still expanding, or in the largest agricultural regions where there is a demand for land, says Mr. Proklov. But, the expert adds, given that the maximum loan term is only five years, with a high price of the plot, payments will be significantly higher than with a mortgage (up to 30 years), which reduces the availability of the product.
For a bank, any POS loan is definitely riskier than a mortgage. “Analysis of the borrower takes place in an accelerated mode with a small package of documents,” explains Natalia Bogomolova, an analyst at NRA bank ratings, noting that this risk is usually taken into account in the rate. “But when collecting debt on a POS loan, the bank does not lose the opportunity to turn it into property acquired with borrowed funds, unless it turns out to be the borrower’s only home,” emphasizes Ekaterina Tokareva, partner at Pen & Paper. In a mortgage, the lawyer clarifies, foreclosure on a pledge is permissible in this case as well.
However, Post-Bank considers the fears of analysts and lawyers to be exaggerated. In the existing POS lending program for building a house (implemented since 2018), Mr. Pavlov emphasizes, the level of overdue debt is “constantly below market indicators in classic POS lending.” In his opinion, there are “strong reasons to believe that such values will remain in lending for the purchase of land.”
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