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The Government of the Republic of Serbia

In the service of citizens

Interest rate for housing loans hits record low

Belgrade, 5 April 2006

Director of the National Corporation for Housing Loan Insurance Aleksandar Jovic said that housing loan conditions have been improved over the past year as repayment term was prolonged from 15 to 30 years, installments are by 30% lower, while interest rates hit their record low so far.

Aleksandar Jovic

Jovic said in a press conference that interest rate for subsidised housing loans dropped to less than 4% on the annual level while the interest rate for non-subsidised housing loans linked to euros stands at 5.5% while the interest rate for loans linked to the Swiss franc amounts to 4.35%.

The total sum of insured housing loans exceeds €58 million, nearly 2,100 loans have been secured and 14 banks have signed contracts with the National Corporation for Housing Loan Insurance, he recalled.

Nine banks participate in the housing loan insurance programme in cooperation with the Serbian government, Jovic said adding that the sum of these loans amounts to €19 million, or 750 loans.

Some banks do not even charge administrative expenses, Jovic said and specified that nearly 45% of the approved loans are on the territory of Vojvodina while 40% of loans are approved in Belgrade alone. Jovic announced the congress of the International Union for Housing Finance (IUHF) scheduled for September this year will particularly focus on markets of Serbia and Mexico.

Speaking about the Law on mortgage, Jovic said that the National Corporation for Housing Loan Insurance harmonised its operations with the law under which mortgage can be placed even for facilities under construction.

Under the new law, facilities under construction are finished facilities with issued valid construction licence that meet conditions to be registered as facilities under construction, he specified.

Facilities under construction are divided into three categories, said Jovic, and explained that the first category refers to buildings that are 100% finished but can be registered as facilities under construction, which makes it possible to buy “unregistered” apartments with loans.

The second category includes buildings whose construction is being financed by the bank which has approved the housing loan, while in the third category refers to facilities under construction financed by an independent investor.

Jovic said that the National Corporation for Housing Loan Insurance accepts to secure loans in the first and second categories. He explained that it is not possible at the moment to secure loans for buying apartments whose construction is not being monitored by banks due to conflict with the Law on planning and building, since in that case there is risk concerning the contractor and the completion of construction works.

He said that housing loans make up 5% to 10% of gross domestic product (GDP) in Southeast Europe, while housing loans in Serbia amount to nearly 1% of GDP. He expressed the expectation that Serbia will reach the figure of 5% in the next three years.