In 2022, banks tripled the amount of mortgages for individual housing construction (IZHS). Growth was facilitated by the spread of state programs with low rates. Nevertheless, so far only about 5% of the total volume of mortgage loans falls on individual housing construction. According to market participants, the share will grow and is able to reach 50% with further state support. However, experts draw attention to the high risks in the segment.
In 2022, banks issued almost 33,000 loans for individual housing construction for a total amount of about 140 billion rubles, said Ilya Ivanov, head of the Housing Sector Development direction at Dom.RF. This figure exceeds the level of 2021 by more than three times, he stressed.
About 80% of mortgage loans for individual housing construction are issued under preferential state programs. In particular, about 9.4 thousand loans worth about 39 billion rubles have been issued throughout the country under the pilot program of preferential mortgages for the construction of houses on their own. According to Dom.RF, as of December 2022, the weighted average rate of issuance on loans for the construction of individual housing construction facilities was 6.3%.
Bankers confirm the growth of interest in mortgages on individual housing construction and loans in the segment. “On average, monthly the number of loans issued for individual houses increases by 15%,” says Aleksey Kosyakov, deputy chairman of the board of the Dom.RF bank. “Sberbank in 2022 issued 24.5 thousand loans for individual housing construction in the amount of 100 billion rubles. …the volume of such loans quadrupled last year,” the bank's press service said.
“The pandemic has become a turning point in the development of the suburban real estate market – customer demand in the segment is steadily growing,” explained VTB.
“Recently, a lot of work has been done to expand the scope of mortgage products for individual housing construction. Now there is an opportunity to take a mortgage loan for individual housing construction under all preferential programs with state participation, ”Dom.RF emphasizes. Since last year, “Preferential Mortgage” has been extended to individual housing construction “by the household method”, that is, without the involvement of contractors, they added.
Dom.RF believes that the task of developing the individual housing construction market can be solved by launching a new mechanism, under which citizens' funds will be attracted to escrow accounts, and the contractor will carry out construction using project financing. This is exactly how the construction of apartments in new buildings is taking place now, Dom.RF explained. In this case, they believe, the share of mortgages in the construction of individual housing construction may increase to 50% in the medium term.
However, so far the share of individual housing mortgages in the total volume of mortgages is small: according to market participants, it is about 5%. Bankers are more cautious than Dom.RF, but confirm the prospects for market expansion. “The segment will grow. Prices for objects in high-rise buildings have increased significantly, which will contribute to the flow of part of client demand to the segment of individual houses,” says Vitaly Kostyukevich, head of the retail products department of Absolut Bank.
Nadezhda Karavaeva, junior director for banking ratings at Expert RA, believes that in 2023 mortgage lending for individual housing construction may double: “This will be facilitated not only by the extension of preferential programs, but also by other innovations in the segment, for example, the digitalization of processes.” According to VTB, in 2023, “under a favorable macroeconomic situation,” the volume of loans may increase by 25–50%.
However, experts emphasize rather high risks for such products. In particular, Natalya Vashchelyuk, chief analyst at Sovcombank, notes that when lending to individual housing construction, “there are difficulties with an adequate assessment of the value of the collateral (house, land), as well as the risks that the facility will not be completed.” According to Yegor Lopatin, Deputy Director of the Group of Ratings of Financial Institutions of the NKR, Yegor Lopatin, the most risky type of mortgage on individual housing construction can be called a product for which a house is supposed to be built by the borrower: the risk of unfinished construction and placing a low-liquid asset on the bank's balance sheet under a compensation agreement.