Sberbank of Russia : finances first low-margin project through public housing construction subsidy program

Sberbank has closed its first deal in the framework of the public subsidy program for low-margin housing construction projects. The bank has extended a RUB 368 mn line of credit for the financing of the Lokomotiv residential complex in Engels, Saratov Region.

Crisis support measures - a preferential mortgage and subsidized interest rate for current projects - have supported the housing sector. However, there remains the issue of the low margin status of projects in Russian regions with a low-income population. The Ministry of Construction, Housing and Utilities' new subsidy program facilitates the implementation of projects with low profitability of around 10-15%. Sber's subsidy limit is almost half of the program volume or RUB 3 bn. Currently, we at Sber are considering approximately 80 projects, and we believe that no less than half of them will come under the program.

Sergei Bessonov
Vice President, Director of Lending Products and Processes, Sberbank

Introducing a subsidy program for low-margin projects will help regional developers increase construction by attracting project financing for projects that banks previously were not as interested in. Receiving a subsidy would allow the developer to receive a lower interest rate than the key rate at the start of the project, significantly reducing spending on loan servicing and allowing them to maintain the project's economic efficiency. It was possible to make a swift decision regarding the Lokomotiv housing complex thanks to the teamwork displayed by our experts and the Sberbank Saratov branch employees, as a result of which we were one of the first in the country to take advantage of this program. We plan to keep moving forward confidently toward new achievements!

Ekaterina Rodionova
CEO, OOO SK Novy Vek (Construction Company New Century)

The program developed by the Ministry of Construction, Housing and Utilities of the Russian Federation will facilitate an increase in financing for housing construction in regions where the income level is 15% lower than the national average (49 federal subjects). Thanks to the program, developers carrying out low-margin projects with a construction cost of up to RUB 500 mn in the aforementioned regions can now attract bank financing under favorable conditions and standard funding structure requirements.