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Azerbaijan Mortgage Fund under the Central Bank of Azerbaijan

Azerbaijan Mortgage Fund under the Central Bank of Azerbaijan. Azerbaijan housing finance system STRATEGIC OVERVIEW. The Republic of Azerbaijan General introduction. Capital: Baku Bordering countries: Turkey, Russia, Iran, Georgia. Armenia, Kazakhstan and Turkmenistan

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Azerbaijan Mortgage Fund under the Central Bank of Azerbaijan

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  1. Azerbaijan Mortgage Fundunder the Central Bank of Azerbaijan Azerbaijan housing finance system STRATEGIC OVERVIEW

  2. The Republic of Azerbaijan General introduction

  3. Capital: Baku Bordering countries:Turkey, Russia, Iran, Georgia. Armenia, Kazakhstan and Turkmenistan Area: 86,600 km2 Population: 9.077.000 GDP in 2010: $52 bln, growth 5% Currency: Azeri Manat Rate AZN:1 USD   0.78 1 EUR   1.12 Strategic reserve: $34,2 bln Country rating: Fitch BBB -

  4. Main macroeconomic indicators

  5. Housing stock in Azerbaijan • The housing stock in Azerbaijan dated later 2010 is 111,6 mln.m2 • The dwelling space per capita is 12,8 m2

  6. Average prices for residential housing in Baku, ($/m)

  7. Azerbaijan Mortgage Fund • The AMF was established under the Central Bank of Azerbaijan (CBA) by decree of the President of The Republic of Azerbaijanabout “Establishing mortgage loans system in Azerbaijan” numbered 299, dated 16 September 2005 • AMF: • Only state entity established for the purpose of refinancing mortgage loans; • Azerbaijan Mortgage Fund is a state institution, legal entity; • Mortgage loans is offering to borrowers by authorized credit organizations selected by the CBA; • Main functions of AMF are: • Refinancing mortgage loans originated by pre-approved banks; • Assigning requirements for refinanced mortgage loans; • İssue mortgage bonds in order to attract financial resources; • Managing of financial risk in order to provide its activity and stability; • Within its authorities makes measures to provide liquidity of mortgage lending field and attracts financial resources.

  8. AMF Mission “The main purpose of AMF is to provide mechanisms for housing finance through long-term mortgage loans, as well as to facilitate attraction of local and foreign financial resources” Presidential Decree N339 Baku, December 22, 2005

  9. Development stages • Creating of legislation base - 2004-2005 • Establishing of AMF under the CBA - 2005 • Institutionalization and standardization process 2005- 2006 • Granting the mortgage loan and forming of the market -2006- 2007 • Transition to self-financing mechanism and issuing of cover bonds 2009- 2011

  10. Financial sources • Allocation from State budget; • Earnings from activity including payments on loan principal and interest; • Funds raised from emission of AMF’s securities and its placement; • Foreign loans, technical assistance, grants, etc. to AMF • Other sources stipulated by legislation.

  11. Structure of AMF and its activity • Structure: • AMF consists of 11 divisions and one branch • Staff number 57 • Board of Directors - Executive Board of Central Bank of the Azerbaijan Republic • Executive body- Executive director and two deputies of Executive director • Activity: • Mortgage loans refinanced by AMF are granted by 24Bankspre-approved by NBA . • Mortgage objects are appraised by 12 appraisal companies selected by the AMF • Mortgage objects are insured by 14 insurance companies selected by the AMF

  12. Azerbaijan Mortgage Fund (refinancing scheme) SECONDRY market Azerbaijan Mortgage Fund (only operator in second market) Allocations from state budget Cover bonds of AMF Refinancing Accredited credit organizations (banks) Primary market Mortgage loans Borrowers

  13. AMF products

  14. Mortgage loans by authorized credit organizations, mln.AZN

  15. The dynamics of financial resources for mortgage loans, mln. AZN

  16. AMF’s assets, mln. AZN 01.06.2011 Total assets : 285 624 308,11 AZN 357 030 385,14 USD

  17. AMF’s quotation rate ≤ 8% Loan interest rate AMF’s quotation rate = 4% ACO’s margin ≤ 4% 3% Cost of funding 1% AMF’s spread 4% Margin

  18. Strengths of housing finance system • Existence of strong standardization • The control of Central Bank over the system • No default cases in mortgage portfolio • Small portion of mortgage loans comparison with demand • AMF’s long-term foreign and local currency rating to 'BBB-‘ equals to country ratings. • Development perspectives of housing finance market

  19. Results of market research Demand exceeds offer 6 times

  20. Main problems and difficulties • Registration of property and mortgage rights, problems related to foreclosure process; • Insufficient legislation on cover bonds (mortgage bonds); • Enlihgtment problems related to independent appraisals • Low development level of capital markets; • Absence of potential investors and long term resources in internal market; • Limited conditions and access opportunities to foreign markets • Absence of AMF’s and bank’s relevant experience

  21. Future plans: • To develop and apply new products (Repair mortgage, private house construction mortgage, commercial mortgages, etc.) • Development of legal framework (Law on mortgage bonds, Law on Housing Construction Savings and etc.) • Creating of mortgage quarantee mechanizm for mortgage loans • Shift to market conditions in order to provide sustainability of mortgage system • Issuing of mortgage bonds • Automation of business processes and to apply e-mortgage • Improve mortgage requirements and standards

  22. Azerbaijan Mortgage Fund under the Central Bank of Azerbaijan THANK YOU! Tel: + (99412) 598 18 01/02/03 Faks: + (99412) 598 11 77 info@amf.az www.amf.az

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