Securitization — the key to affordable housing for Ukrainians and effective financing for construction

This was stated by Ruslan Magomedov, Chairman of the NSSMC, at the conference “Towards the Development of a State Housing Policy Strategy” organized by the Ministry of Development with the support of the World Bank.

Bank lending to natural persons is needed to build more housing. And for banks to actively lend, these loans must be liquid. Securitization allows them to be converted into marketable financial instruments that can be sold to investors.

The proposed financing model contents three key components:
● general mechanisms and specific instruments used in the construction financing process — ISI, targeted securities, CFFs, derivative contracts;
● mortgage lending to home buyers regulated by the NBU;
● securitization as a mechanism that allows refinancing mortgage loans, reducing (distributing) risks, and attracting investors.

“Securitization is the foundation of the modern residential finance model. It helps create the efficient circulation of funds between banks, developers, and investors, reducing the burden on the budget and opening up the market to private capital,” said Ruslan Magomedov.

Ukraine has already taken the first steps, in particular, the Law of Ukraine On Rating was adopted, the Concept for the Introduction of a Legislative Framework for Covered Bonds and Securitization in Ukraine was approved, and a draft law is being developed with the support of the World Bank and the EBRD.

In addition to supporting the construction industry, securitization creates instruments for expanding mortgages for citizens, including internally displaced persons, veterans, and large families.

The Commission stresses the need for swift adoption of legislation, synchronization of tax and regulatory rules, and close cooperation with banks to launch a construction financing market that works for people.