U.S. crisis could bury affordable housing in Russia

MOSCOW. (Anatoly Gorev for RIA Novosti) - The mortgage crisis in the United States has had an unpredictable effect in Russia. When it started unfolding, Russian banks imposed tougher credit terms, but later on made an about face.

The overwhelming majority of national banks have not cut down their mortgage programs. Moreover, in the last few days, they have even started lowering credit rates and not at all because they are afraid to lose clients - for 99.9% of them mortgage is not the main source of income. The reason lies elsewhere -- the Russian authorities are apprehensive that the problematic Affordable Housing Project may be cancelled altogether.

Indeed, even if Russian banks had shut down their mortgage programs, in most cases they would have lost a few clients and some modest incomes. The latter would have been stretched out in time anyway rather than come in a lump sum, as with express crediting. With the exception of specialized agencies like the City Mortgage Bank and Delta Credit Bank, other Russian banks see mortgage as a side business. For them it is an opportunity to diversify their portfolio by giving long-term credits and offering their clients one more financial product.

Bankers do not conceal that the presence of mortgage loans in their credit portfolio improves their image and makes their banks more attractive to strategic and portfolio investors, big partners and corporate clients. In general, for the time being, for almost all Russian banks mortgage means some profit, some image, some social involvement (mortgage is a sign of their social responsibility) and some risk management. Losing these virtues is irritating but not fatal, particularly if mortgage programs are just frozen for some time. After all, the banks have every reason to blame this on the international crisis.

It seemed that the banks would go down this road and some programs were indeed frozen. But in parallel the other trend came to the fore - major Russian banks started targeting the clients whose mortgage programs were shut down by other banks. It was hardly a coincidence that the state banks stepped in as "saviors." First, Vneshtorgbank declared its readiness to give credits to those who were cleared for loans in other banks.

Gazprombank, the bank of the Russian gas monopoly, which was not very enthusiastic about "retail" before, became unprecedentedly active in the mortgage market.

Eventually, Sberbank, which is the traditional favorite in Russia, announced its decision not to toughen credit terms. As it was expected, state banks intervened to absorb the blow and private banks followed suit.

Under the circumstances, the Central Bank was no less active as a regulator. Its actions to enhance liquidity in the financial market, or, in simpler terms, to inject funds into the banking system, were approved both in Russia and the West. Once the Central Bank created the conditions for lowering the rates at the interbank loan market, banks stopped curtailing and cancelling their mortgage programs. Moreover, they decided not to increase loan rates or toughen the terms for getting them.

Solidarity of the state banks with the Central Bank was only natural. The American crisis was not a threat to the Russian mortgage market, as it seemed at first sight. It called into question the national Affordable Housing Project, which for the Russian authorities was probably even more important. It has not yet produced impressive results because of the growing prices on housing and a huge gap between the incomes and costs of apartments in different Russian regions.

An increase in mortgage loans, and a weak but steady growth in the share of mortgage deals in the total amount of real estate transactions were the government's all but main achievements in this sphere. All of a sudden, the project was about to be at least suspended for an indefinite time - most probably between today and the parliamentary or even presidential elections. This situation called for quick action. The turn of the tide on the Russian mortgage market in less than a month shows that the Russian authorities can do well when they want to.

Anatoly Gorev is a financial analyst.

The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.