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Ebook Urban housing finance proposals for Mongolia

Submitted by puput on Mon, 09/07/2009 - 02:22

The overriding purpose of this consultancy was to review the housing finance sector and make recommendations for developing an efficient and affordable housing finance market for middle and lower income families, both at the primary and secondary levels.

Although the situation found was not one that could be easily considered encouraging for development of a full-fledged self-sustaining mortgage finance system, we believe that initial, trend-setting steps can be taken to lay the groundwork for such a system and its future growth. In general, there is no inherent reason for a housing finance market not to develop in Mongolia. And we also believe that the moment is now propitious.

The major constraints requiring attention include:

  • The potential housing finance sector, banks and other lenders, such as non bank financial institutions (NBFIs) and Savings and Credit Cooperatives (SCCs), are substantially devoid of medium and long term funding sources as required for home mortgage lending.
  • There is not a stable base of savings accounts at banks and SCCs.
  • Little mortgage financing is available; and what is comes with very short terms, under 5 years at best, and with prohibitive interest rates of 30% in local currency and 17% or more in US dollars, way beyond those which can justify affordable or even prudent mortgage lending.
  • The inescapable condition that for a secondary mortgage market to develop, the primary mortgage market needs to develop first under open market conditions.
  • There are no traditional institutional investors, such as insurance companies and pension funds, to support development of a secondary mortgage market.
  • The capital market is thin and illiquid.
  • The Ministry of Construction and Urban Development is seeking foreign funds at concessional terms in order to provide for the construction, sale and rental of the government’s 40,000 housing units program, all under greatly subsidized rates.

To overcome these constraints, we are proposing a number of first steps. These encompass a broad range of proposals at different institutional levels. But, taken together, we believe they will go a long way towards development of the very much needed housing mortgage finance market.

CONTENT

ABBREVIATIONS AND ACRONYM
ACKNOWLEDGEMENTS
EXECUTIVE SUMMARY
SECTION I: MONGOLIA’S HOUSING FINANCE SECTOR
SECTION II: AFFORDABILITY BY LOW & MEDIUM-INCOME HOUSEHOLDS
A. Housing subsidies

    A1. Supply-side subsidies
    A2. Demand-side subsidies
    A3. Affordability
    A4. Elective second mortgage to cover demand-side subsidies
    A5. Individual savings accounts stimulation
    A6. Qualifying for demand side-subsidies

B. Incremental loans for Ger areas
SECTION III: HOUSING FINANCE CORPORATION (HFC)

    A. Need and opportunity
    B. Proposed structure11

SECTION IV: GOVERNMENT AS HOUSING SECTOR ENABLER/FACILITATOR
ANNEX A: THE FOURTY THOUSAND HOUSING UNITS PROGRAM
ANNEX B: DRAFT GOVERNMENT RESOLUTION ON THE NATIONAL HOUSING CENTER
ANNEX C: MORTGAGE CALCULATOR
ANNEX D: MEETING SCHEDULE

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