Transforming Housing Construction Savings Bank into Otbasy Bank and providing Kazakhstanis with housing — interview with Lyazzat Ibragimova

In his Address to the people "Constructive Public Dialogue - Basis of Stability and Prosperity for Kazakh Citizens’’, the Head of State Kassym-Jomart Tokayev instructed to develop a unified housing policy that will correspond to different levels of family income. Further development of the housing policy to provide the population with housing is planned to be implemented through the Otbasy Bank, which will be created on the basis of Housing Construction Savings Bank. In an interview with, Lyazzat Ibragimova, chair of Housing Construction Savings Bank of Kazakhstan JSC, spoke in more detail about the transformation and provision of Kazakhstanis with housing.


— Lyazzat Erkenovna, please tell us what difficulties the bank faced during the pandemic and the imposed quarantine? How has the work of the Bank changed in terms of home buying?

— We faced the same problems that all business activity of Kazakhstan faced. At the end of March, when it was announced that quarantine measures would be taken, and sanitary doctors in some cities banned our branches from working, we transferred part of the functions to online. The biggest challenge was to organize the loan vacation process — deferral, as many clients have contacted us, the Financial Regulation Agency instructed us to develop a mechanism. On March 27, we announced the Seven Steps Towards Customers promotion. We have about 160 thousand borrowers. In fact, every second mortgagee in the country has a loan today at Housing Construction Savings Bank. It was very important that these people receive fast and quality service. We are the first and, probably, the only bank that gave a loan deferral for three months without supporting documents. We took this step primarily for the convenience of our clients. We wanted our clients not to go anywhere, not to call the call center, to focus as much as possible on the fight against the pandemic. On April 15, we launched a special online service on the bank's website, where you just had to enter the IIN, go through Internet banking, write an application online without leaving home. The bank gave a grace period from March 15 to June 15. There was a choice: you could take a delay of 2 or 3 months, depending on your preferences.

In addition, when we started looking at all the delay mechanisms, it turns out that there are several ways. The most popular way is when you take a grace period of three months, and then transfer these payments for three months to the fourth, fifth, sixth, or divide them further. This method has a very important drawback - the payment increases in the following months. And since the mortgage payment is always a planned expense, which the family always knows in advance that they have to pay 70 thousand tenge monthly, then when the payment is already 100 thousand tenge, they may not be able to cope with it. Therefore, a cardinal decision was made that we provide this deferral in the following way: we put these three additional months, when a person did not pay us during an emergency and quarantine, put a mortgage loan at the end of his term. Let's say the loan had to be fully repaid in July 2026. The client still has payments in August, September, October. But he did not pay from March 15 to June 15, as our President recommended to us.

We thought that 100% of borrowers would apply for such a delay. But, fortunately, we have very disciplined borrowers. Many are participants in state programs, for them this is the only housing, they value it very much. Therefore, the statistics turned out to be very good. 18% or 28,800 families applied for and received this grace period.

Now the volume of bad debts has increased, but we think that by the end of the year it will improve. We work in every way with such borrowers, find out the reasons why people cannot pay. Job loss, temporary loss of income, and so on. In principle, we are in the last place among all banks in terms of the level of problem debts. We have the best loan portfolio. Therefore, in this year's regime it is very important to maintain the quality of portfolios.

— Let's talk about a new service for opening deposits online using biometrics and, in general, what digital transformation projects are being implemented in the bank?

— We quickly solved the first task — we gave a reprieve. The second task was to provide services, but now online. Just in January, we launched one of the new such services — video banking — when you make a video call from the site, and in fact perform the same operations that you do when you come to the branch. A video banker is sitting opposite you. Such a new profession has now appeared. Within a few minutes, while you are introducing yourself, talking, the system takes several photos and biometric identification, that is, it confirms that you, Lyazzat Ibragimova, are our client. A request is made to the Kazakhstan Center for Interbank Settlements, a subsidiary of the National Bank. This is already a state organization. From there comes the answer that yes, the person who is talking to you matches the documents, with the state database, with the identity card of this person. Since we have actually already identified it, we begin operations. We had access there to open a second deposit, change the contractual amounts, transfer to other accounts in other banks, online assignment of a deposit, and so on.

In August there will be such a breakthrough with new services in the continuation of this video banking. It will be possible to make a full termination, pooling of deposits, online insurance, that is, you will not have to go to an insurance company or bank in order to insure your collateral. In this regard, we will move and there will be a completely new online service, the novelty is the opening of the first deposit. You can open this deposit online without visiting a bank branch. We see great prospects in this. This is a serious measure to combat the pandemic, when we do not call a person for direct contact, do not create conditions within our branches. Therefore, the branch system will concentrate more on the lending process. Because there are many restrictions when issuing loans. It is necessary to invite an appraiser, to make a notarization of the transaction, but there we are also moving into an online mortgage. Now we have prepared a small package of legislative initiatives, we are discussing with the Ministry of Industry and Infrastructure Development, the National Bank. We would like to offer the Government to amend some laws, which will allow Kazakhstan to create a full-fledged online mortgage, when you can take and issue a loan for your home without leaving your home. This has now been partially implemented. We are pre-qualified. This is an assessment of solvency. When you sign an application with your electronic digital signature, and we evaluate you according to data from the First Credit Bureau, a pension fund, we give you a certificate that at the moment you could receive, for example, 18 million tenge in our programs. We want to continue this online service right up to the execution of a pledge agreement, registration of property rights, to make an uninterrupted cycle when you can get a full mortgage without leaving your home. This is a big task. I think that until the end of the years we will still discuss legislative initiatives. At the beginning of next year, which will coincide with the fact that we will have Otbasy Bank, we will fully implement this.

— In May, the President instructed to transform Housing Construction Savings Bank into Otbasy Bank by the end of 2020. Please tell us how the transformation will take place? What will this give ordinary citizens?

— Here the question is not only about the bank's rebranding, it is about changing the whole concept of development. In fact, the bank has become a real family bank in 17 years. Our most popular product is the family package. This is when they open deposits for children, spouses, save up, receive a state premium and then at the time of acquiring housing, not one person lives in an apartment, he lives with his family, we combine these deposits, for example, three children and two adults. We want to make a bank in which it will be possible to save up for all family members, and then unite to yield, transfer these deposits and thus it is the family values ​​in our Kazakhstani society that can be consolidated with financial instruments. We have such a small slogan, we always say that if you have an apartment, it is not necessary that you have a happy family, but if you have a happy family, then you will always save up for an apartment. Therefore, Otbasy Bank will have another very important function — registration, distribution of those needy families who want to queue up for housing. The Housing Relations Act has been in existence for over 15 years. It is a little outdated, in my opinion, that is, there is an opportunity to queue up on several grounds. The first sign is industry, professional. If you are a civil servant, an employee of a budgetary organization, a soldier, a pensioner, you belong to socially vulnerable segments of the population. There are, in my opinion, very unfair situations. Let's say a woman works as a teacher in a private kindergarten and a woman who works in a public kindergarten. Their salaries are practically the same, but the one that works in a budgetary organization can get in line, and a person who works in a private kindergarten cannot get up. There are a lot of medical clinics that have the status of economic management. Nurses cannot queue up. And one more criterion, which, I also believe, is unfair from the point of view of Kazakhstanis, if you are a large family and you have four or more children, then you can stand in line, if you have a child with disabilities, you can also stand queue, if you are a single parent, widow, widower, single mother or single father, or divorced, then you can join the queue. But if you have a normal, good family, two or three children, then you get no tools and there are no opportunities to get in line. Therefore, we want to make this accounting system more transparent. For the first time, we began to publish everywhere lists of those who receive loans from us under state programs. Now we also want to publish lists of those in need, that is, I think transparency is a very important issue. Everyone should know who is in these lines, society has the right to such public monitoring and see who is receiving. Only then will social justice in housing policy be fully realized. Otbasy Bank will solve these big tasks in addition to financing, and naturally, a lot of information and explanatory work will be carried out.

— Lyazzat Yerkenovna, within the framework of the Nurly Zher State Program, a new pilot project to provide the population with credit housing 5-10-20 will be launched in the near future. Please tell us about the conditions of the program and how will it be implemented?

— The 5-10-20 Program was developed by order of the Head of State on May 11, when the country emerged from the pandemic. It was said that the problem of people on the waiting list should be solved at a faster pace. Then the Bank allocated 210 billion tenge, we received the first 90 billion and have already started issuing loans. We plan to publish the waiting lists next week. About 20 thousand people on the waiting list are in line from 1986 to 2009, in different regions in different ways. For example, in Almaty the queue went faster, we have about 500 people on the waiting list. In Nur-Sultan, depending on demand, there are about 2,500 such people on the waiting list. We thought for a very long time about what principle to develop, on what principle to invite, and we realized that all these people who stood in line are equal before the state, and we cannot put forward any criteria now. There will be only one criterion — the date of registration, that is, depending on the year when the person submitted documents and stood in this queue. First we will call 86, 87, 89, 90s. We will be able to process a large volume of those who entered the queue before 2009-2010. Preferential terms will be offered (10% down payment), that is, the maximum size of an apartment in Nur-Sultan will be 18 million tenge, you need to have 1 million 800 thousand tenge. Or you can open a deposit, if you did not have one, become a depositor and put this money. The entire rate on the loan is 5% per annum for the first 8 years, then it is reduced to 4% or 3.5%, depending on the estimated indicator. We provide such loans for up to 20 years. It will be possible to choose not only the housing that was built by the akimats, because sometimes people on the waiting list ask for the right to choose in connection with the location of the house. Here, for the first time, the Government agreed to meet those on the waiting list, now the main thing is that it should be new housing or from a developer. The second mechanism that we will now introduce is housing under construction. If the developer has a guarantee from the Housing Construction Guarantee Fund, then this means that the state will complete the construction of this housing without fail. Citizens will be able to choose an object and a developer, we will place objects in open sources and a person will have a choice. That is, it will be possible to submit an application within a month and then, when it is approved, spend two months looking for housing, and in three months we will already start processing the next clients.

— According to your forecasts, when will we be able to reduce the number of families in need?

— I think that the number of families in need can be reduced in the course of systematic work in 7-8 years, if the sources for which you need to issue are very precisely worked out. Of course, it is necessary that each person contributes to the system, so that he saves and at least has 20-25% on the deposit in order to develop new convenient products. Therefore, we are taking the initiative to consider the possibility of housing deductions.

As for the real estate market, this is the most popular question we are asked now: "When will prices fall?" After the quarantine, we saw a surge in interest in all mortgages. In June, we issued more than 5 thousand loans. This is a deferred demand from March, April and May. In July, the demand was also very high. We are also implementing Baqytty Otbasy, Askeri Baspana, we will already start the full implementation of consideration of applications 5-10-20 from August. The only thing I can say is that we see a drop in prices on the elite housing market, because very large expensive apartments are in little demand. I think I predict a decline in prices in the secondary housing market, because everything there depends on the speed of sale, i.e. if you want a high price, then you will sell long enough. The ability to pay of the population has a very strong effect, quarantine has a very strong effect on the income and ability to pay of the population, so I think that there are no factors that would contribute to the rise in real estate prices in Kazakhstan. At the same time, in the long term, demand will be very large, because our demographic structure of the population is formed in such a way that we have a lot of young people, more than 200 thousand annually, in 12 years it will be 350 thousand young people over 20 years old who will register marriages, marry, create families, have children and need housing. On July 1, we launched a new program, the bank's own product, called ‘’Zhas Otbasy". If you have been married for less than three years and open a deposit, then you can deposit 50% of the cost immediately, then you will have a reduced rate. We have 8.5% there, and we specially made 6% for a young family. The demand is very high, about 1.5 thousand deposits were opened in just a month. Many families now write: “Why 3 years? 5 years is also a short period for a young family. Support us too.’’ We will consider these proposals. Therefore, it is very important for us that the transformation into Otbasy Bank takes place not only on paper. We want all families to have equal access regardless of profession, social status, namely, depending on income. That is, every low-income family must apply for a mortgage with lower rates. We will implement these principles, by the end of the year we will implement a large package of legislative initiatives together with the Ministry of Industry and Infrastructure Development with the support of the Government, explain to the public, and only then, when we are fully prepared and correspond to this high status of Otbasy Bank, we will already renaming process.

— How fast is the social program Askeri Baspana being implemented? How much housing has been issued and will be issued? Tell us about the conditions of the program, who can apply for housing? When is the next call for applications?

— This is a very interesting program. In 2017, there were changes in the law on housing payments for military personnel and employees of special state bodies. It is no secret that these people are actually under oath 24 hours a day, serve our state, and accordingly they have the opportunity to receive housing payments. Our task was to make such a product so that they could become homeowners. This program has been running since 2017. Every year, about 4 thousand families in the framework of various programs, including the special program Askeri Baspana, receive housing. This year the budget is 60 billion tenge. The bank attracts this money to the markets in market conditions. We think that by the end of the year, about 12 thousand families will be fully provided with housing. We are walking at the speed of 4-5 thousand families annually. Soldiers need to save. Housing payments are based on the region and the number of children in the family. The more children, the larger the family, the more payments. Part of the funds must be spent on rent, and part of it must be saved on a special deposit in order to form your initial payment. Now there are a lot of servicemen who have 2-4 million tenge. For a down payment, you need to accumulate 15%. This year, over a thousand families, despite the state of emergency, received loans. This work will continue until the end of the year.

— What are the results of the Baqytty Otbasy program for large, single-parent and low-income families? What conditions and requirements does the program set? Where and which apartments can be purchased under this program?

— This program is the most convenient. When the Government approved it as an integral part of the large state program Nurly Zher, and we agreed on all the conditions, we made the most flexible conditions. Firstly, according to the Baqytty Otbasy program, you can buy an apartment in both the primary and secondary markets. Our analysis shows that 90% buy in the secondary market, because these are families with four or more children, or there is a disabled child at home. Accommodation is chosen next to a special boarding school or a special kindergarten. This is the main advantage of the program. Secondly, the program includes only these three groups. We are allocated 50 billion tenge annually. Last year 5,000 families were provided with housing, this year we have already issued 2,000 loans, another 3,000 have been approved. The program has a large social focus, this is when family income should not exceed a certain level, which allows us to provide, first of all, families with low income. The program is very popular in the regions, which is clearly linked to the location. That is, if you stand in line in the city of Nur-Sultan, then you buy housing there, if you are in the Mangystau region, you can buy it both in Aktau and on any territory of the region. The program is very interesting and in demand. Many write that we should continue it, as it has the lowest rate that can exist in Kazakhstan at all — 2% per annum for the entire loan term.

— In conclusion, Lyazzat Erkenovna, tell us what plans the bank has for the coming years?

It is very important that the number of system participants in the bank increases, because back in 2016 we had only 600 thousand depositors, respectively, we issued less than 18 thousand loans per year. 15 thousand families participated in all market and intermediate programs. Any family that accumulates 50% could participate, now we have reached the figure of 50 thousand. The more depositors, the larger the deposit portfolio, the larger the deposit portfolio, the more we can issue. Now we have 1.7 million depositors, which is about 17% of the economically active population. We set ourselves a target of 30% for voluntary contributions. I think that within 3-4 years we will be able to bring the number of depositors to 2.7 million people. This is a solvable task, because there is faith in the bank. We teach people to save even at low wages.

— Thanks for the interview!

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