2011. 06. 27

Ulaanbaatar, Mongolia

HOUSING FINANCE MARKET IN MONGOLIA

Ts.EnkhbayarCEO, MIK

WORKSHOP ON HOUSING

FINANCE

Content

• Housing condition• Housing finance market• Achievements and Challenges• Future steps

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Housing Condition

Ger House,apartment

Other

UrbanTotal Urban household: 479 503 (67%)

156 744 (32.7%) 316 116 (65.9%) 6 643 (1.4%)

Rural Total Rural household: 234 277 (33%)

234 277 (70.9%) 66 692 (28.5%) 1 493 (0.6%)

Some Housing Statistics 2010 – result of Census POPULATION

2 754 685

HOUSEHOLD 713 780

Ger

322 836 (45.2%)House, apartment

382 808 (53.6%)Other

8 136 (1.1%)

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Ger Areas:

- Planning – not proper - Water supply – kiosks (potable)- Sewage – pit latrine- Heating – stove using coal and wood- Electricity – central system- Social infrastructure – not sufficient- Land ownership –yes- Housing finance – savings, assistance from relatives and friends, loans

● Ger – 322 836 (45.2%);● Self built house – 209 931 (29.4%);

Housing Areas:

- Planning –proper , - Water supply – central system- Sewage – central system- Heating – central system- Electricity – central system- Social infrastructure –sufficient- Apartment ownership –yes- Housing finance – mortgage loans, savings

● Apartment – 152 338 (21.3%);● Luxury detached house – 3 839 (0.5%);● Workers flat & dormitory-10 334(1.5%);● Other public dormitory – 6 356 (0.9%);

70%- Population; 59%- UB; 80-90% Provincial Towns;

70%- Population; 59%- UB; 80-90% Provincial Towns;

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Housing finance system development overview

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Housing Finance Market

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Market indicators 2003 2004 2005 2006 2007 2008 2009 2010 2011.Q1

Total Debt Outstanding, mln.₮ 8,199.6 19,018.1 30,839.7 74,318.4 164,625.9 217,098.1 226,040.6 333,776.6 375,101.6

Numbers of Total Borrowers 1,057.0 2,892.0 4,774.0 8,984.0 16,444.0 16,590.0 16,628.0 19,700.0 20,597.0

Market Interest Rate, % 12.0% 14.5% 14.7% 17.8% 16.0% 18.7% 17.7% 15.7% 14.8%

Mortgage market percentage of Systemic loan market, %

1.35% 1.81% 2.31% 3.33% 8.01% 8.27% 8.51% 10.72% 10.05%

Mortgage market overview

Market growth Market demand

Issues to be done for developing efficient mortgage market development

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Main Goal Promotion and development of primary and secondary mortgage markets by raising medium to long term funds on domestic and foreign capital market through a series of capital market tools to create and ensure s smooth functioning of long-term financing system to promote affordable home ownership and urban development for Mongolia’s people.

Why we established MIK- Increase the affordability of the housing loan

- Stable structure for long term financing

- Liquidity facility

- Increase in housing mortgage market

- Need for capital market development

Shareholders

Established 06.09.2006

Мongolian Mortgage Corporation (MIK)

• Healthy and well structured Institutional set up;• Total mortgage pool of purchase, 10.3 bln MNT; (PWR,

PWOR)• MIK issued covered bond, 6.3 bln MNT;• MIK Bond listed as a repo financing instrument under

Bank of Mongolia;• Standardized and documented origination and servicing;• Developed 2 Toolkits:

– Mortgage loan; Micro housing loans

• The shelf registration• Mortgage law, Asset backed securities law has been

approved• Capacity development KfW project

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МIK acheivements:

МIK COOPERATION

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Projects:•KFW-Promotion of Mortgage Financing Mongolia project •IFC-Localization of Mortgage lending toolkit•IFC-Micro Housing Finance Project

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• Government policy and programs 40000, 4000, 100000

• Funding support for Housing and housing finance• Supply side driven by private sector is growing• Housing finance system was set up-provite sector• Mortgage loan became one of the best financial

product • Primary Mortgage market is in place • Secondary mortgage market does start up• The shelf registration -FRC• Legal framework was set up

– Mortgage law, Asset backed securities law

• The first OTC market initiative has been commenced• Mortgage loan standardization and documentation• Capacity building on mortgage market development

Achievements

– Lack of long term funding– Low affordability rate – Capital market development- weak– Understanding of mortgage related business – Insufficient Mortgage infrastructure

• Professional appraisal• Credit scoring • Mortgage insurance• Tax and accounting guidelines • IT infrastructure

– MIK plays dual role: • driven force of mortgage market development;• Cope business development

– Economic stability– There is no local institutional investors– Absence of clear PPP on housing finance 12

Challenges

– Clear Government affordable housing and housing finance strategy

– Needs strong explicit and implicit support by State (funding, guarantee)

– PPP on housing and housing finance market development

– Deepening secondary mortgage market • Needs long term funding that could relief mortgage loans from

banks and convert into securities

– Encouraging funding and equity investments by international financial institutions (EBRD, IFC, USAID, KFW….)

– Domestic institutional investor (SSFund/pension fund)– Strong cooperation among relevant institutions

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What we are looking for…?

THANK YOU

Mongolian Mortgage Corporation LLC /MIK/

MIK Building , United Nations street-38Chingeltei district-4, 15160Ulaabaatar, Mongolia

www.mik.mn, info@mik.mn  Tel: (976) 11-328267Fax (976) 11-313338