Interview: How will the law on reducing housing program operators work?

On Tuesday, Head of State Kassym-Jomart Tokayev signed the law “On Amendments and Additions to Some Legislative Acts of the Republic of Kazakhstan on Reducing the Number of Housing Program Operators.” According to this law, a single operator for the implementation of housing policy will work in Kazakhstan. Director of the Construction Industry and Housing and Public Utilities Department of the Ministry of Industry and Infrastructure Development Ruslan Lepesov spoke in more detail about the work of the single operator in an interview with

The main goal of the adopted law is to implement the Address of the Head of State to the people of Kazakhstan “Constructive Public Dialogue - the Basis of Stability and Prosperity of Kazakhstan” regarding the reduction in the number of housing program operators.

The law is aimed at combining existing housing program operators of the Kazakhstan Mortgage Company JSC, Baiterek Development JSC, Housing Construction Guarantee Fund JSC and the tool for subsidizing developers through Damu JSC into the Unified Housing Construction Operator, as well as eliminating duplicate functions and reduction of the general administrative expenses of existing operators.

— Ruslan Talgatovich, what work was carried out by the Ministry of Industry and Infrastructure Development before the introduction of the Law "On Amendments and Additions to Some Legislative Acts of the Republic of Kazakhstan on the Reduction of the Number of Housing Program Operators"?

— Deputies of the Majilis of the Parliament of the Republic of Kazakhstan initiated a draft law “On Amendments and Additions to Some Legislative Acts of the Republic of Kazakhstan on the Reduction of the Number of Housing Program Operators”. In order to solve the systemic problem of increasing the housing provision of the country's population, the Government of the Republic of Kazakhstan has developed a conceptually new line of activity “rental housing with the right to purchase,” involving Kazakhstan Mortgage Company JSC and Baiterek Development JSC as operators in this area. In this regard, Kazakhstan Mortgage Company and Baiterek Development ensured the construction and purchase of finished housing, for the purpose of subsequent lease with redemption, to persons registered with local executive bodies as needing housing. The total rental portfolio of Kazakhstan Mortgage Company and Baiterek Development, as of the beginning of 2020, amounted to 169.9 billion tenge. Today 1,807.7 thousand m2 of housing or 30,324 apartments are rented. Thus, earlier Kazakhstan Mortgage Company and Baiterek Development duplicated the functions of providing people with rental housing with redemption. After the creation of the Single Operator, all the functions of organizing the construction, purchase of housing, including through financing of private developers, redemption of bonds of local executive bodies, will be carried out by one operator.

— It was previously noted that the Single Operator is subject to the authority of the National Bank and the Agency for Regulation and Development of the Financial Market in the field of housing finance, guaranteeing shared construction, and providing rental housing with purchase in the framework of state programs. What features will also be transferred?

— According to the adopted law, the Mortgage Organization with direct or indirect state participation in the authorized capital is recognized as the Unified Housing Operator, the purpose of which is to participate in the implementation of the state policy in the field of ensuring housing affordability for the population of the Republic of Kazakhstan, through mortgage lending and the provision of rental housing, the development of shared housing construction, as well as ensuring the availability of financial resources for the construction industry. Thus, the Single Operator, being a mortgage organization, will be controlled by the Agency of the Republic of Kazakhstan on Regulation and Development of the Financial Market and the National Bank of the Republic of Kazakhstan in the implementation of the following activities: provision of mortgage loans; management of mortgage claim rights in the interests and on behalf of the principal; the acquisition of rights to demand payment from the buyer of goods (works, services) with the acceptance of the risk of non-payment; leasing activities; investment activity; sale of pledged property; issue and placement of securities, including bonds; granting loans to an authorized organization, defined in accordance with the Law of the Republic of Kazakhstan “On shared participation in housing construction”, and to legal entities engaged in construction within the framework of state housing construction programs and others. At the same time, taking into account that the Single Operator will carry out the activities provided for by the legislation of the Republic of Kazakhstan on shared participation in housing construction, on architectural, urban planning and construction activities, its activities will be controlled by the authorized body in the field of architecture and urban planning, namely the following activities: provision guarantees for the completion of the construction of an apartment building; guaranteeing mortgage loans (mortgage housing loans), rental payments, contributions on savings of housing construction savings; guaranteeing loans (credits) for the acquisition of a share in an apartment building; financing and implementation of investment projects; property lease (rental) of real estate, including with the right of subsequent redemption; activities assigned to the Single Operator by the legislation of the Republic of Kazakhstan on architectural, urban planning and construction activities.

— During the presentation of the bill in Parliament, it was noted that as a result of the merger, the administrative expenses of operators will be reduced by 42%.

— As a result of the merger of the three housing program operators, total administrative expenses will be reduced from 8.73 billion tenge to 5.09 billion tenge (42%), as well as the number of employees — from 311 to 233 people (25%). In each region of the country, a single operator will have its representatives.

— Will the functions of the Single Operator be duplicated with JSC Housing Construction Savings Bank?

— A single operator will work exclusively with private developers and akimats to build affordable housing through tools such as:

1) ensuring the safety of shared deposits of the population by guaranteeing the completion of construction;

2) financing housing construction through the mechanisms of redemption of bonds of akimats;

3) subsidizing interest rates on commercial loans of private developers;

4) lending to authorized organizations under akimats, as well as legal entities engaged in the construction of housing in the framework of state programs;

5) financing and implementing investment projects.

Housing Construction Savings Bank, in turn, works exclusively with individuals. This is the only bank in the country that is developing a system of housing construction savings by issuing preferential housing loans to the population. In addition, according to the instruction of the Head of State, by the end of 2020, a full-fledged development and support institute, Otbasy Bank, will be created on the basis of the bank, which will centrally carry out accounting, statement and distribution of housing. To achieve this goal, it is planned to transfer the existing priority system from the akimats to Otbasy Bank, which will operate on a “one-stop-shop” basis for families without housing. It is planned to provide full access to the bank to state databases of individuals. Housing Support Center will be created and an accessibility ladder will be actively introduced.

Thus, the number of existing five operators will be reduced to two — the Holding’s housing block will stimulate the construction of housing through the functions of the Single Operator and will provide demand from working citizens through loans from the Housing Construction Savings Bank.

— Will the Single Operator oversee the work of companies that carry out shared housing construction and housing cooperatives?

— The main task of the Single Operator will be to ensure the stability and effectiveness of the system of guaranteeing equity participation in housing construction. In this regard, the Single Operator will provide guarantees for the completion of the construction of an apartment building. The concluded agreement on the provision of guarantees with the Single Operator is the basis for the conclusion by the authorized company of agreements on equity participation in housing construction with equity holders and the attraction of money for equity holders. In order to ensure the fulfillment of the obligations of the developer and the authorized company under the guarantee agreement, the Unified Operator is provided with a pledge of a land plot together with an object of incomplete construction, as well as voting shares (stakes in the authorized capital) of the authorized company and an agreement for the trust management of voting shares (stakes in the charter capital), which takes effect in the event of a guarantee case.

The decision of the Single Operator on the possible occurrence of a warranty case is made based on the results:

1) monitoring the construction of an apartment building;

2) monthly and other reports of an engineering company;

3) information received from an authorized company, authorized body;

4) a written appeal from the shareholder (s).

Single Operator:

1) carries out verification of information on non-fulfillment or improper fulfillment of obligations by an authorized company for the construction of a multi-apartment residential building no later than ten business days from the date of receipt of the information;

2) sends a request to the developer, an authorized company for clarification of the specified information.

Thus, the Single Operator, within the framework of the authority vested in it, will control the work of developers carrying out construction at the expense of equity holders.

— Thank you for the interview!

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