Piotr Oleinik, Dmytro Tereburke
Collateralized real estate is property that becomes the property of a lender, such as a bank, if the borrower violates or fails to fulfill obligations under a collateralized loan agreement. It is not profitable for the lender to own such real estate, so the lender tries to sell it as soon as possible.
“Realization of pledged real estate can go in three directions. If the borrower sees that he is unable to repay the loan, he has changed conditions, he can put the pledged property for sale independently with the consent of the bank, – explains the director of real estate agency Nika Imobil Peter Oleynik. – This is practically a free sale, without any restrictions. The only thing is that you need to discuss the payment scheme with the bank – whether the debtor repays or reissues the loan, etc.”.
The second situation is when an insolvency procedure is announced. The bank, as the main creditor, appoints its insolvency administrator, who undertakes the sale of the pledged object. And the third option, when the bank takes possession of the object (if the administrator for some reason could not sell it) and realizes it independently, or turns to realtors. You can find the section “sale of pledges” on the banks’ website.
But, as a rule, Pyotr Oleinik notes, illiquid objects are listed there. Since the liquid ones are sold by the debtor himself, or are quickly sold at the bank level, i.e. they do not go on public sale.
“When the owner himself enters the market to realize the pledged object, as a rule, at this stage no one prevents him. But only a few people are able to do this,” says real estate expert Dmitri Tereburke. – However, if the object is very good, and raider positions of financial structures (it can be not only banks, but also various microfinance organizations) are very strong, then he will be obstructed. They are mostly procedural in nature (i.e. they will require a lot of certificates and authorizations). The forms may be different, but the essence is the same – to move the debtor to the next stage, i.e. the stage of forced sale”.
There is an opinion that mortgaged real estate can often be purchased at reduced prices.
“If the object is sold compulsorily, it is clear that it will cost less than a normal real estate free from “history”. Because the transaction itself involves huge future risks, – says Peter Oleynik. – They are less if it is an apartment. But if we are talking about an engineering structure, there may be problems with electricity, water supply, etc. As a rule, owners who have brought the object to forced sale give very little information”.
According to him, the speed of realization of the object also affects. That is, when it is sold on unattractive conditions and in a limited period of time, the price will always be lower than on the free market. What percentage the discount will be depends on the value of the object.
In principle, mortgaged real estate is a good enough resource to replenish the market. In Chisinau there are many examples when quite famous buildings were sold as pledged property. For example, the unfinished office of Ascom company on Stefan cel Mare Avenue, “Patria” cinema, “Lukoil” entertainment center, “Megapolis Mall”.
Currently, some experts are predicting an unenviable future for the Prima Casa Plus program, whose participants may find themselves in a difficult situation due to higher loan rates and rising utility rates.
“Today, the average interest you have to pay for a loan is 340-400 euros, and utility bills cost about the same amount. Who can cope with such a burden on the family budget? – asks Dmitri Tereburke. – The problem of debts will grow like a snowball. Pledged apartments and private houses, i.e. consumer real estate, is an illiquid market. It is impossible for a private person to sell such an apartment on the secondary market, because no one will buy it. And we have not created a legal field for this”.
According to him, the real estate market is currently depressed, and the forecasts are not very comforting. In the Prima Casa Plus program, 30-40% are speculative contracts, he believes. And only 20-30% contracts of those who really need housing. These are the ones who really need to be helped.
The solution to the problem should begin with the creation of an information-analytical database, in which to collect data on all contracts to separate the necessary contracts from speculative ones. The former should be taken into account and really help: change the terms, fix the rates, and somehow guarantee the format of the sale of pledges.
Petro Oleynik believes that everything depends on the state of the real estate market. At the moment, taking into account the fact that prices for apartments have stopped growing, but are not falling yet, he does not see any special problems for the participants of the Prima Casa Plus program. However, given the low down payment or exemption from it altogether, there is a certain risk for the state, which assumes the guarantee of up to 70% of the loan payment.
In the case of falling apartment prices, the owner may wonder whether it makes sense to pay the loan if its current market value is less than the contracted value. Anything can happen, because mortgages are issued for up to 30 years.
“But so far I don’t see any risks,” Oleynik says. – Currently, the cost of the apartments covers the loan. But what will happen next, we do not know. The real estate market depends on the general economic situation, and now it is entering a period of stagnation, which is characterized by low activity, high prices and a small number of transactions. I think it is unlikely that prices will go down or up much. There are no prerequisites for lower prices.
Finance Minister Victoria Belous also believes that there is no cause for concern. “I do not see an immediate risk for citizens who have taken mortgage loans. I am a member of the Financial Stability Committee and I can confirm that borrowers generally fulfill their obligations. The situation is stable,” she stated.
At the same time, the Minister admitted that the program Prima Casa Plus partially affected the price increase, but, in her opinion, the solution is not to limit demand, but to stimulate supply in the housing market.
“The program did have an impact, but we need to consider supply as well. We are working to simplify the processes and create more conditions to increase the amount of housing under construction. Thus, we hope that prices will stabilize,” she added.
