Tamuna Matatashvili and Goga Eradze have just bought a new home on the outskirts of Georgia’s capital, Tbilisi.
It’s the type of house the two parents say they thought would take a lifetime to buy. But an affordable, long-term loan allowed them to purchase the place a lot sooner.
“We used to be right in the center of the city and we would wake up every morning with the smell of pollution and the noise of traffic. The new house allows us new opportunities,” says Matatashvili (see video here), adding that the place also means their young daughter now has her own room and a yard to play in.
In developed markets, mortgage financing is readily available, typically reaching 50 percent or more of gross domestic product. But in emerging markets it’s often less than 10 percent of GDP. In Georgia it’s even less than that.
Now the global financial crisis has worsened the problem, chasing investors away. To respond to the crisis, IFC, a member of the World Bank Group, committed more than $350 million in lending and equity financing to Georgia’s financial sector from 2009 to 2013. This financial boost – one of the broadest and most systemic efforts IFC has undertaken in support of any country’s financial sector – has ensured lending to small and medium enterprises and homeowners.
In the past several years, Georgia’s Bank Republic has fully utilized $55 million in debt finance from IFC to support the bank’s lending programs for SMEs and Georgian homeowners. IFC has recently provided an additional $20 million loan to the bank to support its ability to provide mortgages to local borrowers.
“IFC is providing the funding, and in this agreement the funding is dedicated to mortgage loans,” says Christian Carmagnolle, CEO, Bank Republic Société Générale Group. “It is very important because we need as a bank to provide the best product to our client, and we need to make it easier for Georgian people to access real estate.”
A large share of the housing stock in Georgia was constructed between 1960 and 1990. Most of these older houses are in poor condition. Georgian borrowers hoping to improve their living conditions based on their assets are advised by bank credit officers on how much they could feasibly borrow and how long it would take to repay.
“The first think we look at is lending history, then we look at salary and other possible sources of income,” says Tata Tsintsadze, Personal Banker, Bank Republic Société Générale Group.
Goga Eradze says that because their mortgage is stretched out over 10 years, he and his wife now have the money – and time – to put the final touches on their new home.
“This thing here is going to be a place where you can relax, all the time, to have a quiet peaceful place just to stay with yourself, with your family, with loved ones,” says Eradze, adding that he also considers the new home a smart investment for his family in the future.