The pros and cons of renting out housing, which the Russian State Duma is proposing to replace preferential mortgages, were discussed by Valeria Bratkova, head of the Department of Economics and Financial Law at the North Caucasus Institute, a branch of RANEPA.
The preferential mortgage programme was launched to make home purchases more affordable for developers. It has been in force since spring 2020 and was introduced during the period of Covid restrictions as a temporary support measure, the expert recalled.
“Conditions changed, terms were extended several times and without reference to anti-crisis programs. The Central Bank has repeatedly pointed out the deterioration of the quality of loans, as mortgages were issued to borrowers who already had a high debt burden. As a result, the rise in real estate prices was twice as fast as the rise in wages in the country. Prime mortgages were expensive for the budget. Banks were practically not affected, as the difference between the market and the reduced rate was made up by the state, compensating them for the loss of income.” — Bratkova said.
State social programs are designed to ensure a fair redistribution of resources. It turns out, he said, that “the unserviced prime mortgage performed the opposite task.”
The state program of preferential mortgages for new construction at 8% ended in the Russian Federation on July 1, 2024. Currently, the State Duma has proposed an alternative to preferential mortgages: renting a home with the possibility of gradually purchasing an apartment, with a fixed rent.
“Under the conditions of sanctions, an increase in the key rate (since July – 18%, and according to experts, it is possible to increase it in 2025 to 22%), mortgages have become less affordable. Therefore, new mechanisms for the purchase of real estate are needed. This mechanism can be housing leasing – a type of renting residential property for a long period of time with subsequent purchase.” — Bratkova noted.
This mechanism has its pros and cons.
“In the event of the bankruptcy of the leasing company, the apartment will be included in the bankruptcy estate, so additional measures are necessary to protect the rights of people who will buy a home under a lease agreement. On the other hand, the mechanism is more accessible due to less strict criteria for assessing the tenant compared to mortgage loans.” – said the expert.
