Mortgage government subsidies may be taken away from the largest banks

Sberbank, VTB and Alfa Bank, whose combined share in the country’s mortgage market reaches 85%, may lose government subsidies to cover costs when issuing housing loans with state support. The state company Dom.RF, as the operator of the distribution of these funds, warned that budget money could be redistributed in favor of credit institutions that did not introduce commissions for developers for each preferential borrower. Three large banks, on the contrary, introduced additional fees, which caused a scandal in the real estate market. Bankers, in turn, argue that the current conditions for issuing preferential mortgages make them unprofitable for lenders.

Dom.RF may revise the rules for issuing limits to banks allocated by the country’s budget to support mortgages at state-subsidized rates, the general director of the state-owned company, Vitaly Mutko, said on January 16. According to him, these funds can be redistributed in favor of banks that did not introduce a commission for developers for each home buyer who takes out a preferential mortgage. “Dom.RF” is the operator of the distribution of budget limits for preferential mortgage programs.

Sberbank was the first to introduce commissions in the amount of 7.5–11% of the loan amount for developers from the beginning of 2024 (see “Kommersant” dated December 27, 2023). Then such payments appeared at VTB, Alfa Bank, and Uralsib Bank. The banks argued this by saying that until September 2023 they received from the state the difference between the rate under the state program and the key rate and 2.5% on top, and from December 23, the size of the compensation delta was reduced to 1.5%.

The commissions caused a scandal in the real estate market. A number of large developers, including PIK Group, Setl Group, promised to refuse to work with banks that introduced a commission (see Kommersant of January 12). The Central Bank also did not like the additional fees from developers, which on January 15 said that developers would shift additional costs onto the shoulders of buyers, increasing housing prices.

A Kommersant source in the banking market says that Mr. Mutko’s statement is a direct signal to large banks “about excommunicating them from budget limits.” According to him, Sberbank is unlikely to agree to cancel commissions now.

VTB Vice President Georgy Gorshkov said on January 16 at the Russia forum and exhibition that “due to a reduction in subsidies by 0.5 percentage points for all government programs from the end of 2023, preferential mortgages have become unprofitable for banks.” The top manager proposed returning subsidies to the level that existed before September 2023.

On Tuesday, Sberbank, VTB and Alfa Bank did not respond to Kommersant’s request. Stanislav Tyves, Deputy Chairman of the Board for Retail Business of Uralsib, told Kommersant that the bank does not see the need for additional limits at the current level of profitability of state mortgage programs.

The combined share of Sberbank, VTB and Alfa Bank in the country’s mortgage market at the end of 2023 was 84.6%, according to Frank FG data. Thus, in November 2023, Sber issued housing loans for 450.8 billion rubles, or 61.1% of the total, VTB – for 127.7 billion rubles, or 17.3%, Alfa Bank – for 45.8 billion rubles, or 6.2%.

According to the latest data released by the Russian government, from the launch of preferential mortgages in 2020 to the current moment, the total volume of limits provided for by the federal budget to cover bank expenses has exceeded 12 trillion rubles. The largest amount – 6 trillion rubles – is allocated for the program at 8% per annum, for family mortgages at 6% – 4.6 trillion rubles, for the Far Eastern mortgage at 2% – 1.346 trillion rubles.

Dom.RF did not tell Kommersant the already selected amount of limits, adding only that the distribution of funds is taking place in stages. For example, in the coming days funds will be distributed according to applications that banks submitted to Dom.RF in December 2023.

In the real estate market, they predict that Sberbank and VTB will maintain their positions in the mortgage market, even if commissions for developers are not abolished. In this case, a very likely scenario will be an increase in the cost of apartments for buyers, notes Rustam Azizov, director of mortgage sales and implementation of financial instruments at A101 Group of Companies. Including due to rising housing prices, according to Vasily Grigoriev, director of the market research department at CORE.XP, by the end of 2024, the demand for mortgages may decrease by 13–18% year on year. Vitaly Mutko predicts that by the end of this year throughout Russia, the volume of mortgage issuance will be halved, to 1.3 million loans.

Khalil Aminov, Olga Sherunkova