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The role of the KMC in addressing social issues

october 14, 2016

Despite the increase in the number of deals, shortage of housing is still observed in the country

In Kazakhstan, in the first half of 2016 the number of housing purchase and sale deals increased by 13.1 % - up to 87,867 deals from the same period a year earlier. This was reported by the Committee for Statistics of the RoK. Despite the increase in the number of deals, shortage of housing is still observed in the country. The housing problem is under constant control of the Head of State and the Government, and they pay much attention to this area. It is not only aimed at the improvement of the population life quality, ensuring social stability, but also at the economic growth of the country.
Before the global economic crisis the real estate market had developed very actively, as people bought about 50% of housing in the country thanks to mortgage programs.  But, following the suspension of mortgage lending in Kazakhstan this market has significantly fallen. The situation was aggravated by the currency depreciation of the last two years. In these conditions the state rental housing program should become a way out of the crisis at the housing market and an incentive for the population and the construction industry. Also, this program is an opportunity to address the problem of affordability of qualitative and inexpensive housing for the population.
The Kazakhstan Mortgage Company was founded in the end of 2000 year to stimulate the mortgage market and implement the system of mortgage bonds’ securing. Today the KMC, a branch organization of “Baiterek” Holding, remains one of the most important operators of the rental housing program as part of the Regions Development Program until 2020. From the beginning of the program implementation more than 500 thousand sq.m  or more than 8,000 apartments were put into operation in Astana, Almaty, Shymkent, Aktobe, Aktau, Ust-Kamenogorsk, Karaganda, Kokshetau, Kostanay, Kyzylorda, Pavlodar, Semey, Taldykorgan, Taraz, as well as in the Almaty, Akmola and West Kazakhstan regions. New apartments were granted to the most vulnerable segments of the population, i.e. multiple-child and single-parent families, families having or bringing up disabled children, orphaned children, orphans lacking parental support, repatriates, public officers, military servants, employees of budget organizations.
Currently, the President and the Government impose heavy responsibility on the Kazakhstan Mortgage Company. This year the KMC, supported by “Baiterek” Holding, plans to put into operation 326 thousand sq.m of rental housing as part of the state programs’ implementation.
In total, it is planned to provide 1.4 million sq.m of rental housing for the 5-year period of the Program implementation.
It’s obvious that the company shall be profitable, as it shows its efficiency and correctness of the policy chosen. Just last year this figure was 3.8 billion KZT, and on the results of 9 months of this year the profit rose up to 4.3 billion KZT (by 1.6 times higher from the same period a year earlier); assets rose by 9.7% – up to 269.84 billion KZT; and the equity capital – by 8.7% – up to 51.9 billion KZT.
The new program – new opportunities
In early July, the President proposed to create a rental housing program, excluding the repurchase. “In the future, we need to provide rental housing without its purchase. If a citizen cannot buy it and if one wants to ensure the mobility of labor movement, he may move to another city / another region and obtain rental housing there. We must establish such a network in Kazakhstan,” - the Head of State noted.
Indeed, if a person cannot buy housing and the mortgage is too expensive, it means that one need to consider the problem of getting housing for rent. For this reason, Minister of National Economy Kuandyk Bishimbayev later explained the way this mechanism will work. “Baiterek” Holding will act as the single operator of this program and construction of rental housing without repurchase will be carried out through the KMC; rental housing repurchase is made through the House Construction Savings Bank.
“Rental housing without repurchase will be granted to the most vulnerable social groups, as well as to improve the mobility of labor  movement inside Kazakhstan in order to promote the labor immigration from excess working regions to the regions with a lack of labor,” – the Minister explained.
In foreign countries, living in rent is a habitual thing and usual practice. These so-called “rental houses” abroad can be owned both by large companies and the state. But their primary purpose is to support labor migration and the most vulnerable people. Furthermore, they don’t doom people to a lifetime mortgage and debt bondage, which may result in that a person, who failed to pay his/her bank debt, may be on the street. For this purpose, the Government reasoned that the creation of the mechanism of rental housing without a purchase option will stabilize the housing problem and create opportunities of confident living in Kazakhstan for citizens.