New housing policy: rental subsidies and external investment in affordable housing

Aidar Arifkhanov, Chairman of the Management Board of “Baiterek” National Managing Holding JSC, during a session of the Government of the Republic of Kazakhstan, reported on the Holding’s work under the new housing policy.

Market investment in affordable residential housing

According to Aidar Arifkhanov, 387 billion tenge, intended for the construction of subsidized housing, are now being circulated by akimats ensuring a conversion cycle of every 2 years. In order to increase the construction, the Single Operator of Housing Construction will attract 61 billion tenge more operating under market conditions.

– The attracted funding will be used to mix funds with current volumes, which will allow redeeming akimat bonds at a single rate of 4.25% per annum. It will increase the turnover of funds to 448.5 billion tenge and allow us to build 2.5 million square meters of housing, – said the head of the Baiterek Holding.

This year, it is planned to attract about 300 billion tenge operating under market conditions. As the Chairman of the Board noted, commercial banks, insurance and financial organizations operating in the domestic and Russian markets are considered as potential investors. Negotiations with the Eurasian Development Bank and Sberbank of Russia are expected to be completed in the first quarter of 2021.

In addition, it is proposed to introduce project financing to support financially stable real estate developers who cannot receive commercial loans from banks due to the lack of collateral.

Speaking at the government session, Aidar Arifkhanov also announced a system of subsidizing private rental housing for those on the waiting list with income below one living wage. The system was developed on behalf of Kassym-Zhomart Tokayev, the President of Kazakhstan, and in collaboration with the Ministry of Industry and Infrastructure Development. 

Safe equity construction

Aidar Arifkhanov considers the cases of fraud committed in the field of equity housing construction by unscrupulous developers a problem. According to him, over 100 such companies have been detected over the past two years.

– Financially unstable real estate developers raise money through various cooperatives, unions, and share contributions by promising people high-quality and inexpensive apartments. In this case, no one guarantees that the construction will be completed. From now on, only two methods are to be applied: guaranteeing and project financing through second-tier banks, – said the head of the Baiterek Holding.

Aidar Arifkhanov believes that it is necessary to introduce a simple and understandable rating of construction companies that have the right to collect money from people.

– The principle is as follows: financially stable companies can stick to the existing guaranteeing system. For companies with a low rating, the Single Operator will attract equity deposits from people at fixed prices and put these funds in a special escrow account to ensure their safety. In turn, commercial banks will be able to issue mortgages so people can purchase real estate without additional collateral, – said the Baiterek Holding’s Chairman of the Board.

Aidar Arifkhanov believes that the planned amount of residential construction will be achieved this year due to the aforementioned measures.