The Asian Development Bank (ADB) has approved $200 million in loans that will help the Government of Uzbekistan reform its housing finance programs and provide families with more affordable mortgage products.

Under the Mortgage Market Sector Development Program, ADB will provide a $50 million policy-based loan for reforms to help make the government’s housing subsidy system more efficient. ADB will also provide a $150 million financial intermediation loan to enable domestic commercial banks to provide residential mortgage and housing improvement loans. ADB has supported the gradual evolution of the country’s housing sector and mortgage market through two rural housing programs.

“The fact that residential mortgages are largely unavailable and unaffordable to many lower- and middle-income families is a significant challenge in Uzbekistan,” said ADB Principal Financial Sector Specialist for Central and West Asia Mr. Peter Marro. “ADB’s program will assist the government’s efforts to reform its housing finance programs and ensure that long-term funding for market-based residential mortgage credit can be provided through the banking sector.”

To satisfy future projected demand, Uzbekistan will need to build around 145,000 housing units annually. The existing government housing finance programs are not sufficient to meet the growing demand for housing. Commercial banks, meanwhile, are constrained by the lack of access to long-term funding, limiting their capacity to provide residential mortgage loans.

The reforms will be undertaken by a newly created Housing Assistance Unit under the Ministry of Finance that will also be responsible for developing innovative finance solutions such as one-time subsidy schemes for low-income beneficiaries and rental programs.

“The government will also establish the Uzbekistan Mortgage Refinancing Company, a financial institution with private sector participation, to ensure access to local currency long-term funding for banks,” said ADB Senior Private Sector Development Officer for Central and West Asia Mr. Bobir Gafurov. “The company will refinance mortgage loans and housing improvement loans provided by participating banks at an interest rate close to market rates.”

Apart from loans for $200 million, ADB will also provide an $800,000 technical assistance grant to help implement the program.