Stimulus for baby boom: what families to have 450K rubles of mortgage debt written off

The Federation Council is going to consider a law on financial incentive for the third and next children in the short run

Stimulus for baby boom: what families to have 450K rubles of mortgage debt written off
Photo: David Kazansky

The Federation Council was to consider a bill on partial write-off of mortgage debt in large families on 26 June. Parents whose third or next child was born from 1 January 2019 to 31 December will be written of 450,000 rubles of mortgage debt. A corresponding document prepared by Vladimir Putin’s request was adopted in the third reading. The Federation Council’s Committee for Budget also supported it and recommended the Upper Chamber to approve it. Realnoe Vremya asked DOM.RF operator of the programme who can, first of all, hope for the compensation and how the debt would be written off.

0,5 million support

The bill on write-off of 450,000 rubles of mortgage debt in large families passed through three readings in the State Duma. The Federation Council’s Committee for Budget recommended the Upper Chamber to approve the document at the plenary session on 26 June.

The amount of support is 450,000 rubles per family. This sum can be used to pay off the main debt, and if the debt is smaller, the money can be used to pay the interest. The compensation won’t be taxed. Mortgage can be taken off not only to purchase a flat but a dwelling, a land parcel for private housing development.

Putin mentioned for the first time an opportunity to support families with many children in the address to the Federation Council in February and said that this sum would offset a significant part of a flat’s price together with the maternity capital. The president drew the attention of the State Duma’s deputies and members of the Federation Council that this measure (together with the maternity capital) would need “big money” and asked to consider this money, as the law would be retrospective. About 30,000 families will be able to get the support this year. The bill doesn’t consider adopted children. In addition, both the children and the applicant must be citizens of Russia. A part of the mortgage can be written off only once.

Putin mentioned for the first time an opportunity to support families with children in the address to the Federation Council in February. Photo:

10bn to large families in 2019

The government’s agent will control the compliance of citizens with terms to make such payments — DOM.RF JSC united institution for housing development. It is said in the conclusion to the law’s project as of 23 May that the organisation will get access to information about state registration of acts of citizens’ state from the Register Office USR.

As Realnoe Vremya was explained in the press service of DOM.RF, the organisation will interact with creditors and transfer money to write off borrowers’ credits and control banks’ compliance with state support terms. To get the state support, borrowers will have to go to a bank, and the bank will send the documents to the organisation. After checking the compliance with the requirements of the programme, the organisation will transfer the money to the creditor to write off a part of the borrower’s credit debt.

The organisation specified that 5bn rubles would be allocated for the programme from the federal budget in 2019. Vice Premier Anton Siluanov said about it last week. He also noted that the government’s reserve fund would add another 5 billion.

“The government will define the order of the programme, including the order of citizens’ address to get the support and the list of necessary documents. DOM.RF will monthly send an application to the Ministry of Finance to get lost income subsidies and offset costs on the programme,” the organisation clarifies.

Obstacle for families

To get the support, a family must meet several criteria at once, it is a barrier to get the support. “We must understand how many families will ask for the compensation. The temporary costs will probably be an obstacle,” notes head of Fiscal Policy of an economic expert group Aleksandra Suslina says giving an example of tax deduction not everyone asks for.

“It isn’t just large families but families whose children were born in a certain period and had had a mortgage at that moment — many terms must be met at once. From my point of view, the number of such families isn’t so high,” the interlocutor goes on. According to the bill’s authors, about 30,000 families can ask for help this year.

According to Suslina, it won’t be hard to find the money for the compensation in the federal budget: “Perhaps the 450,000 rubles are little for Moscow, but it is significant for some regions. In any case, it is very little for the budget.”

“Children”s impact on mortgage market

Junior Director in Bank Credits in Expert RA agency Yekaterina Schurikhina says that the initiative won’t have a significant influence on growth of the mortgage market: “For instance, about 1,5m mortgage loans were granted in 2018, and the number of potential clients who can use the state supporting measures isn’t big compared to the market’s general volume.”

The interlocutor notes that the key function of this initiative is social, and it isn’t designed to support the mortgage market: “The given sum in combination with the money of the maternity capital, which can also be spent to purchase a house, and the opportunity to get a mortgage with a rate of up to 6% throughout the term can significantly solve large families’ housing problem. Especially in the regions where realty is cheaper.”

The mortgage market isn’t in decline, but there is no growth seen last year because of the fear of a rise in the rate. “Fewer mortgage loans began to be granted late last year because of a rise in rates (because of the growth of the key rate and the introduction of escrow accounts for equity depositors),” says Docent of the Department of Financial Markets at Plekhanov Russian University of Economics Tatiana Belyanchikova. The interlocutor supposes that slight growth of mortgage loan is predictable on condition that the new system will run smoothly especially in regions where 450,000 rubles with the maternity capital can cover a significant sum of the purchased flat.”

“To perform the task in the president’s February address about the reduction in the mortgage rate if the Bank of Russia’s key rate doesn’t fall in the short run (and there is no serious reason for it), there will be needed money from the budget, and it will be necessary to introduce additional social programmes and get an average, lower mortgage loan on their basis. <…> If it works out, the number of families who will want to improve their living conditions by the new rules — with the compensation and the lower rate — will significantly grow. And then big sums will be needed from the budget until 2022,” Belyanchikova notes.

Discrepancy in views

Work on targeted social help is underway now, Suslina reminds: “In this situation, it is not very clear how it matches: on the one hand, we say that we must give the benefit only to those who really need it, on the other hand, we increase benefits for everyone who meets the criterion of the number of children, though there are quite wealthy large families, and a mortgage can cost millions,” the interlocutor specifies noting that particularly the recent offer of head of the government Dmitry Medvedev to raise the “offensive” compensation for care for a kid 200 times, but only for the needy. A corresponding bill has recently been introduced to the State Duma.

“Perhaps there was sense in supporting only the needy. It seems to me that income is a more important parameter, not the status of a family,” the expert stresses.

“Such decisions should be made closer to the end of the budget cycle, for instance, they could be included to the budget,” Suslina reminds. Now the budget for 2019 is reconsidered, amendments were approved in the second reading. The Russian Ministry of Finance clarifies that the new version has 5 billion claimed by Siluanov.

By Leysan Nabiyeva