PUTIN AS THATCHER:

A Russian reform hits home: mortgages: For his second term, President Putin has made home ownership a priority. (Scott Peterson, 3/23/04, CS Monitor)

Part of Mr. Putin's campaign focused on mortgages, and the need for a "legislative package that could 'launch' an affordable housing market." The problems must be "addressed without delay" in the spring parliamentary session, Putin said, because "only a free man can ensure the state's prosperity."

The budding market has now loaned $400 million to $500 million by some counts, with an average mortgage of $18,000, paid back over seven to 15 years. The Association of Russian Banks, says Georgy Gangus, expects the market to quadruple during the next three years, toward a potential volume of $30 billion.

But bringing mortgages to Russia has not been easy. Though seeds of a mortgage system were sown in the late 1990s, legal and psychological hurdles persist. The law enabling lenders to foreclose on the property of defaulters remains untested, for example, so lending banks have been cautious.

And while most Soviet-era apartments were simply given to those who were resident in them when the communist regime fell apart, laws defining land ownership were only passed in 2001.

In a demand-driven real estate market - where prices in some better Moscow areas soared 40 percent last year - many families can't afford to move without a loan. Until recently, tax and finance laws were also in flux; often borrowers have little collateral other than their jobs.

"[Lending] is impeded by the fact that there are no credit histories in Russia, no credit rating agencies, and no credit bureaus," says Gerald Gaige, the head of Real Estate and Valuation Advisory at Ernst & Young, who has worked in Russia for 10 years.

Among the laws expected to be passed this spring is one that smooths the process now prohibiting banks and financial institutions from sharing credit information, Mr. Gaige says. Only now are assets such as buildings and property in Russia beginning to be valued and "monetized," he adds; new rules in the works will also create mortgage-backed securities, to make more cash available to lenders.

So far there are only "thousands, not millions" of mortgages in Russia, a figure that Gaige expects to "accelerate" since some 100 banks and institutions are already geared up to make such loans.

This is the most hopeful sign yet that Mr. Putin gets it.

Posted by Orrin Judd at March 22, 2004 10:09 PM