Pitfalls of Crediting

We decided to ask about it the bankers directly.

Taking into account the costs of real estate, most of prospective buyers prefer to enter into a transaction at the stage of «foundation pit», when a flat costs about two times cheaper, than at the moment of handing-over of the house. In this event they must wait, still in the long run the price will be more or less acceptable. Only one fact is confusing – the banks are not willing to credit such objects. And to buy a lot on credit is also a problem. The reason for that we decided to find out, as the saying goes, at first hand. The questions of «Komsomolka» answers Deputy Chairman of the Board of Ukrgasbank Lyudmyla Viktorivna Bonch-Bruyevych.

- Why the banks do not like to work with new building projects?
- The matter is that current laws have a number of unregulated issues, which increase banks’ risks. Today many financial institutions begin to widely provide credits for investing by way of sale-purchase of target passive bonds, which then shall be pledged. But there exists certain difficulty. If the first owner of the real estate was investor-borrower, there is a situation, when a long-term credit remains unsecured for a certain period of time.

For example, on the one hand, providing a credit, a bank receives pledged bonds and blocks them for a certain period of time or until occurrence of certain event. On the other hand, to receive the real estate into ownership the investor-borrower must have bonds with removed restrictions. According to our laws, the bonds may be presented for retirement only by their owner, in this case the investor-borrower.

Therefore, if the borrower does not settle accounts with the bank before the moment of retirement of bonds for the purpose of legalization of property rights to this real estate, the bank actually loses the security. There are no any guarantees, that after legalization of property rights, the real estate will be pledged with the bank. Even if the contract between the bank and the investor-borrower contemplates the obligation of the latter after legalization of property rights to the real estate to pledge it with the bank, this will not solve all problems. If the owner refuses to pledge the real estate, the bank may only file a claim. Consideration of the case will take not one day, and in the mean time the owner will be able to alienate the real estate. That is why the banks prefer to provide credits on the security of target bonds for the term up to the date of their retirement, in other words, the term of handing-over of the house, or if the first owner of the handed-over real estate is the issuer of the bonds himself.

- And how are things with crediting of lots purchase?
- The Land Code of Ukraine regulates that the lots for agricultural (farm) economy and production of other agricultural products, as well as land areas (shares), may not be sold or alienated in any other way until January 1, 2008, accept for their demise and for withdrawal of land for public needs.

At the same time, the notaries practice certification of agreements on alienation of lots, which purpose is to keep private farming. Hence, most of the notaries believe that moratorium does not apply to these lots, the same opinion has the Ministry of Justice of Ukraine and the State Committee of Ukraine on Land Resources.

At present there is a bill in the parliament, which contemplates prohibition of sale of the land determined for agricultural purposes. In the event such changes are made to the Land Code of Ukraine, the issue concerning lots for private farming, which were pledges with the banks, shall be left unregulated.

Besides, there are bills, which suggest to change in the Land Code of Ukraine the wording "agricultural (farm) economy" for "farm economy". To my mind, approval of such version of changes shall clarify the situation and will make the land market more transparent.

With these and many other issues related to minimization of the bank’s risks in connection with legalization of providing security for obligations connected with crediting of clients, deals, first of all, legal department of the bank.

According to the practice of Ukrgasbank, often the only possible way out of the situation for the client is to legalize documents at the legal department of the bank.

12.01.2007