State-Run Program of Housing Construction
State-run Program
of Housing Construction to Be Implemented in Kazakhstan
in 2005-2007
Economic upturn as well as aspiration of greater part of the Kazakhstan population for upgrading of their living conditions called forth relevance of housing construction. Housing construction is acknowledged as a priority vector in the Kazakhstan 2030 Development Strategy and is one of the most essential tasks to be addressed at the nation-wide level.
Enhancement of the competitive edge of Kazakhstan in the mid run calls for a novel policy of housing construction.
In this context, the major vectors of the State-run Program of Housing Construction are package solution to problems relating to housing construction development; and provision of all segments of population with affordable housing. The said Program was elaborated with consideration of the Presidential Address to the Nation of Kazakhstan as of March 19, 2004 – “Towards competitive Kazakhstan, competitive economy, and competitive nation”.
The following objectives have been defined as steps to the ultimate goal:
- to ensure balance of supply and demand at the housing market;
- to attract private investments into the housing construction sector and encourage private housing construction;
- to facilitate shaping of an efficient construction segment;
- and to ensure accessibility of mortgage programs and housing construction savings programs for all segments of population.
Program Implementation in the course of the 3 years will require KZT 150 billion of budget funds: KZT 60.5 billion in 2005; KZT 63.7 billion in 2006; and KZT 25.8 billion in 2007. Besides, a loan extended in 2005 worth KZT 42 billion is going to be reinvested in 2007. The Program will be financed out of the state budget, as well as out of private funds and legal entities’ funds.
As of today, 96,8% of the housing stock in the Republic of Kazakhstan is privately owned, and the state only owns 3,2%.
With the current norms being set at 18 m2 of housing per capita, as of the end of 2003 the actual indicator stood at 17 m2.
One of the factors deterring growth of housing construction is its high cost.
According to the Agency for Statistics, in the period of 2000 – 2003, average actual cost of 1 m2 of housing in all towns of Kazakhstan - except for Astana and Atyrau, where the cost exceeded average level - stood at KZT 47.5 – 60.3 thousand.
To ensure affordability of the housing for wider segments of the population, the said Program provides measures to reduce the cost of construction through encouragement of competition amidst construction companies. A major mechanism to enhance competition will be tenders held by local executive power bodies when placing orders for construction of municipal housing and when extending credits to developers, with further distribution of the housing among certain categories of citizens via mortgage programs and housing construction savings programs.
Mortgages is one of the most efficient ways of attracting investments into the housing construction sector. Mortgage programs allow coordinating the interests of the participating parties – interest in improvement of living conditions on the part of the population, interest in getting fees on the part of the banks, interests in effective workload on the part of construction companies, and interest in economic growth facilitated by mortgages – on the part of the Government.
Second tier banks have been providing mortgage services to the population since 1998. At the outset, interest rates on mortgage credits stood at 20%, starting from 2003 they have been fluctuating within the range of 12-15%, and the volume of the first installment has been reduced. But even with these terms of mortgage crediting, this type of services is only affordable for selected segments of the population. The reason for that is lack of sufficient funds to make the first installment and the accrued interest. Within the framework of the Program of Housing Construction, there was Kazakhstani Mortgage Company (KMC) established. Its chartered capital as of today totals KZT 2,5 billion.
In the system of mortgage crediting, in partnership with the KMC, there have been operating 8 banks and 2 financial organizations of limited scope of services. Among the KMC partners there are such banks and financial institutions as Caspian Bank, Astana – Finance, CenterCredit Bank, ATF Bank, BTA – Ipoteka, Nurbank, Nauryz Bank, TexacaBank, Alliance Bank, and Tsesnabank.
Within the period of the Program Implementation, all the housing will be distributed among participants of mortgage programs. According to estimates, the mortgage crediting system will cover 49 thousand families, including 11,7 thousand families in 2005, 16,5 thousand families in 2006, and 20,8 thousand families in 2007.
As of early 2006, there have been 1364 applications (for mortgage credits) totaling KZT 5,2 billion submitted to the Kazakhstani Fund for Guaranteeing of Credits. Second-tier banks and mortgage companies – participants of the State-run Program of Housing Construction - have extended mortgage credits pursuant to 383 applications totaling KZT 924,9 million.
According to the Agency for Statistics, as of January 2006, investments to housing construction from all sources reached KZT 16,3 billion. The total floor area of the commissioned housing made up 328.9 thousand m 2, 111,9% as compared to January 2005.
The following cities account for major shares in the total of commissioned housing: Astana (22%), Southern Kazakhstani oblast (15%), Almaty (12,2%), Atyrau oblast (8,5%).
Within the three years, with the planned growth rate of the residential blocks’ commissioning, the following results are going to be achieved:
- the total floor area will make up over 12 million square meters;
- over 45 thousand new jobs will be created;
- new housing will be “equipped” with more amenities and will be safer;
- architecture silhouette of cities and other human settlements will get refined;
- primary market of housing will get boosted;
- construction materials imports will be diminished;
- adoption of estimated norms will ensure investments efficiency and cost optimization;
- collectability of taxes imposed on the construction activities will be raised, including that of the property tax and income tax imposed on developers;
- positive effect will be exerted on associated segments – construction materials, electric and chemical industries, metallurgy and home appliances production.
