Ayrat Farrakhov: ‘There is a chance of returning to previous preferential mortgage parameters’

“We must support the availability of the mortgage”

The preferential mortgage rate has increased from 7 to 12% since 1 April. The amount of the mortgage has risen too. Do you think there is a chance of returning to the previous parameters?

There is a chance of returning to the previous parameters, and this is a target of the Russian government. Throughout last week, we discussed the report of the Bank of Russia in the State Duma. Our reserves, gold reserves, the amount of frozen money, inflation as crucial macroeconomic indicator and, of course, the mortgage, which relates to everybody, became the most discussed issues.

The sudden rise in the key rate of the Bank of Russia to 20% in reply to the unfriendly actions were justified, the only possible step. And in these conditions, the mortgage couldn’t have the same figures. By the number, the Bank of Russia already reduced the key rate to 17%. But it still remains defensive, the numbers aren’t high enough so far. We expect it to fall. But the case is that the economy of our country as well as the global economy is now in a phase of a very big growth of the consumer price index (that’s to say, inflation). High inflation is bad, low inflation is the foundation of the economy. It is impossible to have a low mortgage rate amid high inflation.

The state has already made specific decisions. We have saved the Far Eastern and rural mortgage — the numbers are low enough there. A decision on as high subsidisation of mortgage as possible has already been made. Today it is 12%, moreover, the sums are growing (Editor’s note: on 26 April, Mikhail Mishustin ordered to prepare documents to extend the preferential mortgage till the end of the year and reduce its rate to 95). This is important because the mortgage is also the main driver to not only solve young families’ problems but also to develop the economy, create new jobs.

But discussing the problem of high prices for medicines, we have already said that a balance is key in the market economy. If you remember, when we tried to make the mortgage as available as possible two years ago, the market very quickly responded by raising housing prices. So it is vital to balance because as soon as we made such a decision, we immediately get an effect. Today’s economic situation amid growing inflation and inflation expectations, sanctions, new post-COVID-19 reality requires certain adaptation. Therefore, on the one hand, we of course must support the availability of the mortgage but at the same time try to make sure this doesn’t have opposite effects such as further evaluation of housing. Otherwise all our efforts will levelled — this is the specifics of the market economy.

Why doesn’t the preferential mortgage apply to second-hand housing?

It does to a certain degree. It isn’t always aimed at it, but some bank programmes consider buying second-hand housing too. I think the structure of this programme needs to be considered in detail. But undoubtedly, federal resources are mainly designed to deliver new housing because it is capital investments that need to be supported. But you have asked the correct question, and it is also important to develop in this area.

Summing up the talk about the housing market, still, where do you think the prices and demand will be going to?

People also need housing, and of course the state needs to take every effort to meet this demand. And citizens should have the opportunity to get cheap resources to improve their living conditions. Demand will be defined by real terms of mortgage programmes and real incomes of citizens. By 2024, the Bank of Russia sets the task of returning to target inflation of 4%. When it was 4%, our mortgage programmes cost 7%. It was perfect for everybody. But it is impossible to develop in this segment separately from the rest of the economy. Of course, we seriously depend on the macroeconomic situation in the country. But I think that a cautious, considered policy of the Bank of Russia together with the rest of factors will help us to switch from the strict monetary policy to certain softening. And then mortgage programmes will become more accessible.

As for citizens’ real incomes: we don’t see a difference in average salaries between Nizhnekamsk and Kazan. Moreover, the difference in housing is colossal — it became exorbitant in Kazan. What a leap is this? And why is the differentiation growing?

Kazan is a capital. And housing prices are really very high.

But the average salaries aren’t like in a capital.

They anyway differ. At least there is a difference in salary between Naberezhnye Chelny and Kazan. At the same time, the price also includes a problem of capitals. In Kazan, it is important to consider that the capability for development isn’t so big, from a perspective of the territory. New construction projects always have problems. They, in turn, require road issues to be resolved quickly to minimise traffic jams and provide citizens with jobs. For instance, President of the republic Rustam Minnikhanov indicated these issues when talking about Salavat Kupere microdistrict. It became possible to rehouse a lot of people, solve their housing problem. At the same time, other issues arise: schools, employment, unemployment in other places. All this requires balanced decisions. So it is necessary to consider a situation strategically when making decisions.

“There will be announced the parameters of state-funded workers’ salary growth and pension indexation”

Speaking about inflation, it is already clear that it will have two digits by the end of the year. What support measures can be taken for businesses and citizens in this regard?

Everybody realises and perfectly understands what times we live in. Considering the report of the Bank of Russia, we clearly imagines the prospects of the second, third, fourth quarters in the conditions when the market will dramatically transform and inflation-related factors will put pressure on citizens’ real incomes. At the same time, we see that due to other states’ unfriendly actions, a lot of plants are shutting down. Therefore a lot of people will need the state’s support.

Of course, the state considers the biggest possible support for small and mid-sized entrepreneurship as its goal first of all. It is good a big programme of actions of the Russian government started during the post-COVID-19 and COVID-19 period. These programmes are now finely tuned, but in general measures have been taken.

Talking about the incomes of citizens who can become jobless, the government has taken a series of steps, which, on the one hand, will help save the production or help people who are being in a difficult situation due to the idle time as much as possible. Also, the government is almost daily making decisions on additional support measures for families with children. The president of Russia has already given dedicated instructions considering inflation expectations and the rise in prices. The parameters of state-funded workers’ salaries and additional pension indexation will be announced soon. We are also going to see a gradual rise in salaries in the commercial sector. In general I think the compensatory measures because of price growth will be taken until the end of the second quarter, this is for sure.

One could only dream about new conditions for IT

How is the geopolitical situation affecting the IT sector? A lot of support measures have been taken precisely for this part of the economy. Are they working? What’s seen in this sphere?

Unprecedented support measures have been taken. From a perspective of tax support, from a perspective realisation, these are one of the most preferential measures, perhaps, around the world. There is almost a tax-free regime, there is no conscription... One could only dream about this several years ago. These conditions are created together with additional financial resources that Russia is spending to implement the programme create good possibilities not only to write a code but also create a company, unite talented developers and start a business.

Due to the uncertainties after the February events, some citizens decided to leave Russia. We will see what will happen next, life will show. But today unprecedented support measures are taken in our country, there is a chance to actively promote your developments. At least I already see a lot of specialists return to the country.

But is it early to say these measures work for stabilisation?

No, on the contrary, these measures facilitate stabilisation. It is a very good signal for our IT industry to save the digitalisation pace. Russia was at a very high level in Internet development and digitalisation pace. I think it is also the foundation of technological effectiveness of all sectors, for instance, the same health care. We want to improve the quality of health care today, we need to develop digitalisation. This becomes important, the state feels and therefore makes decisions to create as comfortable conditions as possible for developers. It is hard to imagine what else could be done today to improve developers’ conditions. I think there will be additional preferential programmes, preferential loans. A state order can be created. But a lot has already been done.

Apart from what has been done at federal level, does Tatarstan plan anything separately as a stronghold of IT development?

Tatarstan has always been in the lead of this work for a reason, for instance, it developed Innopolis because it has always rested on its own developers, guaranteed a state building, launched additional projects, clearly formulated terms of reference, supported developers as much as possible. Therefore we have always actively used the results of their work. I recently talked with the management of Innopolis. None of their projects has stopped. Moreover, no foreign guru, teacher, technologist has left Innopolis today as we see this, for instance, in sports teams.

This is why I am sure that the country has everything to develop the IT industry today. Most importantly, there is a request of the state, a desire to create a competitive environment so that the best and those who deserve it can really develop. This signal from the state helped to overcome this emotional feeling of the situation.

Not populist steps but real measures of economic stabilisation are a priority

You have enumerated the legislative initiatives that are being considered in the State Duma. What other important bills are being prepared now to stabilise the economy?

Today the State Duma is closely working with the Russian government, Federation Council. We are actively working with the community of entrepreneurs — the Chamber of Commerce and Industry, Business Russia, Opora Russia associations. This conglomerate allows making decisions quickly.

The transfer of power of the State Duma on quick federal budget distribution, quick decision-making, its expenditure became the foundation for these decisions. For instance, if earlier only the State Duma made some decisions with its laws at three hearings, today the times want us to make decisions quicker, respond to unfolding conditions in a more flexible way.

Of course, today we need to support the regions of the Federation. The federal budget is in surplus today and it will likely remain such till the end of the year and even next year (though GDP will significantly reduce). But we assume regional budgets will have problems in the second and early third quarters. Therefore it is very important to support regional budgets, regional development programmes.

It is important to flexibly and consistently take not populist steps but those that stabilise the situation in the economy, those that will gradually pursue the goal of decreasing inflation, stabilising prices and, which is crucial, structural transforming the economy because one of the problems we will face, first of all, because of the sanctions imposed are the problems related to supply in the market. And we should consistently create conditions today to open plants, substitute imports to be able to replace products we got used to traditionally but those that can disappear from the market that are on the list that aren’t imported to the territory of Russia. This is why it is necessary to consistently create conditions so that SMEs can master them as the most flexible and fast part of the industry and take them to the market.

What else do you consider as structural changes in the economy?

First of all, a change in the consumption market. In general the shelves in the stores should look like they do now. It is also important to talk about our exports. A lot of enterprises that have export revenue will have to create their markets again today. And going East what we have talked about should be supported by the state.

Financial stability is another vital area. It might seem we have withstood a serious attack on financial institutions today, we have overcome it nowadays. The exchange is operating, we see currency-related restrictions being gradually softened, financial institutions have kept the balance. But at the same time, it is necessary to resolve issues linked with the flow of financial resources. Here certainty is needed, and it is very important for most enterprises. It is important to make additional decisions in this area. These are mostly geopolitical decisions, they have nothing to do with the economic situation.

Inflation growth is determined today by low supply, therefore it is important to work on creating more supply on the market and keep in mind that it will be regulated by the demand from the population. We should compensate citizens for this rise in prices we see today. This balance today is what the government is actively working on.

You will ask if these are resources for this. Even though approximately half of our gold reserves are frozen, we forecast and see that both regional and federal budget incomes aren’t bad. We have good safety margin. And in the future, a surplus federal budget has enough resources that can be allocated to solve problems. But a lot turns on us. Our competitiveness, the ability to quickly create new markets, new connections are the basis of the solution to these difficult problems we have today.

To sum up, I would like to ask. State Duma deputies, including you, have been imposed sanctions. How has this influenced your work and your life?

How can this influence my work? Sanctions pursue several goals: trips, arrest of accounts, property, yachts... But I think it is necessary to work, develop, earn, show off where you live. This is why no, the sanctions haven’t influenced me at all.