World Bank report on Housing Finance Development in Uzbekistan – March 2007 (PDF)

The ADB Board of Directors today approved the multi-tranche financing facility for the government’s five year Housing for Integrated Rural Development Investment Program, with a first tranche payment of $200 million. The over $3 billion investment program will finance more than 40,000 new houses across rural communities nationwide, channelling household savings into investment in rural construction to create jobs.

The program will increase the capacity of local government staff to prepare and carry out effective rural development and investment promotion plans, and support policy reforms that will accelerate private sector development and the establishment of micro and small rural businesses. Coordinated expansion and improvement of rural infrastructure and social services will improve rural living standards, and help address key constraints to home-based micro and small businesses and cottage industries often run by women.

“The goal is to achieve greater inclusive economic growth, and improved rural living standards nationwide. Transparent targeting of rural homebuyers will be implemented to reach critical skilled professionals – teachers, doctors and nurses, and entrepreneurs – much needed to advance social welfare in rural areas and stimulate growth,” said Elaine Glennie, Principal Public Management Specialist in ADB’s Central and West Asia Department.

The loans from ordinary capital resources will be released in up to four tranches, with the first having an 18-year term, a 3-year grace period, and an interest rate set in accordance with ADB’s LIBOR-based lending facility. Counterpart financing for the program will total over $2.5 billion, including down payments from rural homebuyers, and contributions from the Government of Uzbekistan, participating commercial banks, and the private sector. The Ministry of Economy will carry out the program, which is due for completion in December 2016.

Housing Finance Development in Uzbekistan

The Government of Uzbekistan has adopted an important series of initiatives to create a market-based housing finance system, yet recognizes that there remains much work to be done. Reforms started with privatization of housing in the 1990s, and furthered most recently with the adoption of the President’s Resolution “On Further Development of the Housing Market”. There is broad recognition of the need to develop housing markets and housing finance, particularly given the demand for housing, and the potential as a stimulus for employment and investment in the production of building materials, durable goods, and banking services. Since real estate and construction is largely a non-tradable industry, the local multiplier effect of investment is enhanced as most of the investment benefits the domestic economy. In spite of these reforms, the current financial system and real estate markets remain seriously deficient.

The priorities for the Government policy are:

1. Expansion of housing finance will require a substantial effort to reduce inflation, build technical capacity at banks, and implement real estate market reforms.
2. The government’s recognizes that there remains much work to be done, and imposes ambitious deadlines on separate reform steps.
3. Without a reasonably efficient primary market, there can be no mortgage securitization or covered bonds.
4. Near term priorities should be in three areas: the primary market for mortgage lending, the residential real estate market, and the legal and policy framework.