The Cabinet on November 7 approved a bill to implement the state program “First House” that facilitates the access of the population, especially young families, to home loans by partially guaranteeing these. The loan will be repayable in 25 years, in Moldovan lei. The initiative was submitted after analyzing the examples of the neighboring states, especially Romania, where over 200,000 people have benefitted from home loans this way since 2009. We discussed the benefits of the “First House” program in Moldova and the eligibility criteria with deputy minister of finance Yuri Cicibaba.

– What are the advantages of the “First House” program?

First of all, the first own contribution of the beneficiary is of at least 10%. The first installment for home loans provided by banks outside the program is of minimum 30% of the value of the home or additional security is required. For example, if the home is valued at US$100,000 and you want to raise a loan of US$50,000, that home is accepted as security, but is estimated at only US$70,000 and the bank asks for additional security for US$30,000 – an apartment or something else. The young family or young specialist should analyze things attentively before taking the decision to take out a loan. You can buy a smaller apartment and pay faster for it. Or you can buy a more expensive apartment. What if something happens and you lose the payment capacity? That’s why we limited the value of homes that can be purchased within this program to 1 million lei. If the beneficiary does not make payments for 91 days, the loan is considered nonperforming and the secured home is transferred to the bank and the Ministry of Finance. This property is sold and the money obtained from the sale goes to cover all the costs related to the sale, loan and state guarantee. Surely, the sum that remains is refunded to the beneficiary.

– Can a beneficiary ask for the repayments on the loan to be rescheduled?

– Let’s admit that the beneficiary lost the job and needs several months to find another job. This can come to the bank to explain the situation and to ask to be allowed to pay only a part of the monthly installment in the period so as to pay only the interest, not yet a part of the loan. The bank, being interested in not losing the client, can offer this possibility for a particular period, for example of six months. The client will pay only the interest for half a year. When the person finds a job, this will pay the monthly installments fully.  

– The program is intended for persons younger than 45. What are the other requirements? What monthly salary should the beneficiary have?

– A finished one-room apartment in a newly erected building costs €30,000-€35,000. If I raise a home loan of €30,000, the first installment will be €3,000, while the monthly installments 4,700 lei. I’m sure that even a three-room apartment on the secondary market in Chisinau or even a private house in Soroca or another town outside the capital city can be bought with €30,000. In other towns except for Chisinau and Balti, a two-room apartment can cost €15,000-€20,000. In this case the monthly installment is slightly over 2,000 lei. I don’t think a student or a person who just graduated from a factory can pay this loan individually, but these can be helped by the parents. The bill specifies that the incomes of the husband and wife and of the relatives of the first degree, which is the parents, are all taken into account.

– What should be yet done for the program “First House” to become functional?

– In the November 7 meeting, the Government approved two bills that are to be adopted by Parliament as well – the bill to implement the state program “First House” and another bill that introduces amendments to other laws, by which the state tax on the authentication of the home purchase contract is reduced from 0.5% to 0.1% and the tax on the authentication of the home loan contracts signed within the program is decreased to 50 lei. In parallel, the Ministry of Finance is drafting a series of technical documents, which are government decisions. There will be approved a standard contract between the Ministry of Finance, the commercial bank that wants to take part in the program and the Organization for the Development of the Small and Medium-Sized Enterprises Sector (ODIMM).

– What will these technical documents contain and when will they be ready?

– These documents will describe the procedure, who and what are the parties responsible for. They will also refer to particular aspects that are not regulated by law. For example, the National Anticorruption Center, when it presented the appraisal of the bill, said the formula “First come, first served” should be introduced given that the value of the state guarantees will be limited each year based on the budget law. Is the “first come” the person who comes to the bank or who submits the file to the ODIMM for confirmation? We will specify that “first come” refers to the files that reach the ODIMM. We want all the documents to be filed in an electronic form because it is swifter so. I think the technical documents will be ready in 3-4 weeks and will be proposed for public debates then. We hope that work will be finalized by the end of December so that the first commercial bank that joins the program signs it.

– Did the banks express readiness to take part in the program? Are there eligibility criteria for them too?

– The eligibility criteria will be indicated in the secondary regulations that we are drafting. As a matter of fact, all the 11 banks of Moldova meet the requirements. I hope most of them will become involved. Two or three banks should join the program initially. In principle, the banks showed openness. We communicated directly with them to understand the weak points of the program. We realize that this initiative will be successful only if we work together with the commercial banks. The Government does not have money to release loans and does not have experience in this regard.

– How many beneficiaries could be attracted during the first year of the launch of the program?

– According to statistics, the banks annually provide home loans to 1,300-1,400 private individuals. We hope to double this figure. We project that at least 1,000 persons will be able to buy a home during the first year of the program. For me, it is important for the first person who would raise a loan to be happy. A correct decision is made only after a correct assessment of the risks and benefits.

Sabina Rebeja, IPN