Kazakhstan: Promoting Gender Equality in Housing Finance Project

Sovereign Project | 52334-001

1. The project is aligned with the following impact: gender equity promotion and sustainable economic growth achieved. The project will have the following outcome: acquisition and renovation of housing units by women increased.

2. The project will deliver the following outputs: Output 1: Long-term affordable mortgage financing for eligible women borrowers made available. Through the ADB loan HCSBK will provide mortgage loans exclusively targeted at women borrowers to finance at least 3,000 women; Output 2: Accessibility to HCSBK's lending products for eligible women borrowers improved; HCSBK will adopt a gender policy and will conduct at least three nationwide public awareness campaigns on housing finance products for women; Output 3: Gender inclusiveness of the banking sector's housing finance assessed. This output will be delivered by conducting a nationwide study on women's access to housing and finance products which will have to be endorsed by the government.

Project Details

  • Project Officer
    Song, Dai Chang
    Central and West Asia Department
    Request for information
  • Country
    Kazakhstan
  • Sector
    • Finance
Project Name Promoting Gender Equality in Housing Finance Project
Project Number 52334-001
Country Kazakhstan
Project Status Active
Project Type / Modality of Assistance Loan
Technical Assistance
Source of Funding / Amount
Loan 3841-KAZ: Promoting Gender Equality in Housing Finance Project
Ordinary capital resources US$ 100.00 million
TA 9834-KAZ: Supporting the Promoting Gender Equality in Housing Finance Project
Technical Assistance Special Fund US$ 620,000.00
Strategic Agendas Inclusive economic growth
Drivers of Change Gender Equity and Mainstreaming
Governance and capacity development
Knowledge solutions
Partnerships
Private sector development
Sector / Subsector

Finance / Housing finance

Gender Equity and Mainstreaming Gender equity
Description

1. The project is aligned with the following impact: gender equity promotion and sustainable economic growth achieved. The project will have the following outcome: acquisition and renovation of housing units by women increased.

2. The project will deliver the following outputs: Output 1: Long-term affordable mortgage financing for eligible women borrowers made available. Through the ADB loan HCSBK will provide mortgage loans exclusively targeted at women borrowers to finance at least 3,000 women; Output 2: Accessibility to HCSBK's lending products for eligible women borrowers improved; HCSBK will adopt a gender policy and will conduct at least three nationwide public awareness campaigns on housing finance products for women; Output 3: Gender inclusiveness of the banking sector's housing finance assessed. This output will be delivered by conducting a nationwide study on women's access to housing and finance products which will have to be endorsed by the government.

3. ADB will provide HCSBK with an FIL of $100 million equivalent. HCSBK will use the tenge proceeds from ADB to offer affordable residential mortgage finance exclusively to women customers, each acting as the sole borrower and bearer of the legal title to a residential housing unit. The mortgage subloans provided by HCSBK will be used for the acquisition of residential housing units or the renovation of existing homes. A minimum of 60% of the proceeds from the ADB loan will be allocated to provide mortgage loans to female borrowers located in rural regions, i.e., those outside of the four large cities with the lowest poverty rates: Aktau, Almaty, Atyrau and Nur-Sultan. While the maximum monthly income level per household has been set at T320,000, at least 20% of all mortgage loans financed by the ADB loan will be to low-income female borrowers with a monthly household income of less than T200,000. A price ceiling of T30 million will apply for housing units that can be financed under the ADB project, as well as a ceiling of T3.7 million for renovation loans.

Project Rationale and Linkage to Country/Regional Strategy

1. Constraints in the Kazakhstan housing market. As of 1 January 2018, the total housing stock in Kazakhstan consisted of 5,129,743 housing units, of which 66.4% were located in urban areas and 33.6% in rural areas. In 2007 2018, the overall floor space per capita improved from 17.5 square meters (m2) to 21.4 m2 (an increase of 22% per annum). However, despite these improvements, demand for housing remains high because of the following factors:

(i) Rising income. Kazakhstan benefited from higher prices for its commodity exports during a series of resource booms. In 2000-2019, country's per capita income has more than quintupled during the same period, from $1,349 to $8,840.

(ii) Household growth. The number of households in Kazakhstan increased from 4.6 million in 2013 to more than 5.0 million in 2017 as the total population grew while the average household size remained unchanged. The growth was particularly prominent in cities because of ongoing urbanization.

(iii) Ongoing urbanization. During 1996 2019, the urban population increased by 1.5 million, or 19.5%, to 10.7 million persons (58.1% of the total population). This migration from rural to urban areas is expected to continue.

(iv) Inadequate housing stock. Almost half of the current housing stock was built prior to 1980 and has not been substantially upgraded or modernized. Further, about 10% of all families in Kazakhstan live in one-room accommodation and there is an unmet demand for larger housing units. The average floor area per capita of 21.4 m2 (in 2017) is well below international standards. In southern Kazakhstan, the available housing space is even smaller, averaging 18 m2 per person.

2. Low supply of affordable housing with adequate building standards. Although most of the households in Kazakhstan live in their own housing units, affordable quality housing is in low supply, since real house prices rose almost sixfold from 2001 to 2016, for both newly built and existing dwellings. The 2016 economic slowdown has negatively affected the prices and sales volumes of large, expensive housing units, while the demand for modest housing has not slowed down, particularly in the regions located outside the major cities. Although the number of new housing units increased by 67% during 2007 2017 to cover 11.2 million m2 in 2017, this growth accounted for only 3.3% of the total housing stock. Kazakhstan's rental market is also underdeveloped because of a high homeownership rate: 97% of all residents live in a housing unit owned by a household member (however there are cases where 2-3 families live in the same housing unit) and only 3% rent their current housing units.

3. Expensive housing. Prior to the 2008 2009 crisis, the real estate market in Kazakhstan overheated as evidenced by an extremely high housing affordability index of 28.4 years in 2007. After the 2008 market crash, property prices dropped, improving affordability. Since 2011, the housing affordability index has stabilized at about 13 years for new real estate, but for existing housing it has deteriorated from 9.7 years to 10.6 years. As a result, the real estate market in Kazakhstan remains expensive by international standards: it currently ranks as the 13th most expensive country in the world, according to an international property prices index well ahead of neighboring countries such as Azerbaijan (23rd), Georgia (25th), and the Russian Federation (28th).

4. Factors for the low housing affordability in Kazakhstan. The main reasons are (i) sharp devaluation of the local currency in 2014 and 2015, and continued depreciation of the tenge as compared with the United States dollar since 2017 which has substantially increased the cost of house construction since much of the raw material is imported; (ii) persistent inflationary pressures, as evidenced by the consumer price index reaching 5.3% in May 2019; (iii) a concurrent increase in housing prices, which rose by 14% for primary market housing units and 18% for secondary market housing units in 2018; (iv) declining purchasing power of consumer wages since 2015; and (v) inadequate supply of mortgage financing by commercial banks, which experienced high levels of nonperforming loans (NPLs) during the last two financial crises in Kazakhstan because of lending to non-creditworthy borrowers and issuing United States dollar-denominated mortgage loans to borrowers whose earnings were in tenge.

5. Shallow mortgage finance sector. The mortgage finance sector in Kazakhstan is underdeveloped, with mortgage loans comprising 2.2% of gross domestic product in 2018. This level is substantially lower than in neighboring countries, e.g., 12.1% in Georgia and 5.6% in the Russian Federation. Similarly, residential mortgage loans amounted to only T1.4 billion, representing 11% of the total loan portfolio of Kazakhstan's banks as of 31 December 2018 again, a very modest level when compared with other countries in the region such as Georgia (24.5%) or the Russian Federation (42.4%). In terms of loan currency, 97.2% of all outstanding mortgages were in tenge as of April 2019. In addition to being underdeveloped, mortgages in Kazakhstan are also expensive by international standards, with average mortgage payments comprising 203% of net disposable family income in 2019, well above the 164% in Georgia or 150% in the Russian Federation (footnote 12).

6. Low access to mortgage finance for women, in particular in rural areas. Apart from government-led social housing programs, the present mortgage lending market in Kazakhstan is mainly geared toward higher-income groups. Although 4.4 million out of the 9.1 million women in Kazakhstan (51% of the total population) are considered to be economically active, they face a significant gender pay gap of 32%. Furthermore, 50.9% of all Kazakh households are headed by a woman and 15.1% are single mothers (over twice that of single fathers). However, women, more often than men, face lower access to affordable mortgage finance (although women's educational levels in Kazakhstan are at par or higher than those of men) due to major constraints such as accessing bank financial services, prolonged and complicated procedures for commercial loan approval, and excessive paperwork and terms and conditions. In rural areas, potential female borrowers are even more disadvantaged in accessing mortgage financing, as the majority of rural women are occupied in informal self-employed activities (such as the food, agriculture, and trade industries). With lower income levels, they face higher collateral requirements for obtaining mortgage loans. Enabling such female borrowers to acquire a housing unit will help strengthen their access to credit given that real estate remains a preferred type of collateral for most banks. This is particularly relevant for homebound and small business women entrepreneurs (prevalent in rural areas) who face challenges in accessing finance because of the informal and/or irregular nature of their income and their higher credit risk categorization by banks.

7. Government's strategy. Since 2005, the Government of Kazakhstan has initiated various programs to improve access to housing, including housing rental schemes, savings plans, interest rate subsidies, and support to private housing developers. The first such program is the 2017 2021 Nurly Zher housing development program, which was approved on 31 December 2016 with a budget of T800 billion. More recently, the government launched the 7-20-25 housing program, which aims to provide housing to 1.5 million people by the end of 2020. The program is the largest government housing initiative to date, with an indicative financing envelope of T1.0 trillion.

8. Unaffordable housing for a growing number of the population. Despite the achievements made under these state housing programs, owning a modern and well-built housing unit remains unaffordable for many households, in particular young families and young professionals. According to the Ministry of National Economy, about 71.4% of the economically active population could not afford to buy a housing unit. As a consequence, about 2.5 million people in Kazakhstan are currently on the various wait lists for housing and the number continues to grow. The sharp local currency devaluation in 2015 severely affected the ability of households to save for a down payment to obtain a mortgage loan, and it increased the debt burden because of the weakened purchasing power of consumer wages.

9. Consistency with the Asian Development Bank's Strategy 2030 and country strategy. The proposed intervention is aligned with the following key operational priorities of Strategy 2030 of the Asian Development Bank (ADB): (i) increasing support for banks to help improve their capacity, quality, and reach, particularly for low-income populations, to address remaining poverty and reduce inequalities; (ii) promoting rural development; (iii) improving progress in gender equality through financial inclusion; and (iv) supporting innovative financial products. The project is also consistent with ADB's country partnership strategy for Kazakhstan, 2017 2021, which supports inclusive economic growth through infrastructure development, financial inclusion, and enhanced gender equity. The loan is included in ADB's country operations business plan, 2019 2021. Finally, the ADB loan is aligned with the core objectives and goals of the government, in particular, with the Nurly Zher program (para. 9).

10. ADB's sector experience and assistance program. While ADB has no previous experience in the housing finance sector in Kazakhstan, the bank has relevant experience in designing and implementing financial intermediary interventions with substantial gender elements in the country. In 2010, ADB approved the $500 million multitranche financing facility to the Damu Entrepreneurship Development Fund (Damu), which was categorized as effective gender mainstreaming. The project proved that gender action plans (GAPs) are an effective instrument to promote gender equality outcomes and influence government counterparts to build ownership during implementation. In 2016, ADB approved an FIL of $200 million equivalent to Damu to support the resilience of micro, small, and medium-sized enterprises (MSMEs). The project, which is ongoing, provides local currency credit to sustain operations of, and employment by, MSMEs and helped strengthen the credit origination and management of selected participating financial institutions to better serve their MSME clients. It aims to fund at least $50 million equivalent to businesses owned by women, with one-third of the total number of sub-borrowers being women.

11. Development partner coordination. The European Bank for Reconstruction and Development, the International Finance Corporation, the United Nations, and the World Bank support the housing sector and housing finance in Kazakhstan through various initiatives and programs, which include (i) economic, social, and environmental assessments of the country's housing policies and programs; (ii) reviews of the legal and regulatory framework and implementing agencies in the housing finance sector; (iii) business development services; and (iv) assistance in improving the lending technologies and loan products of some of the banks involved in housing finance. ADB closely coordinates with these institutions to avoid any duplication of efforts and build on the lessons learned and achievements made by the other developments partners. For instance, the proposed ADB intervention takes into account the recommendations made by a recent International Finance Corporation review of HCSBK's operations, which suggested that HCSBK should (i) diversify its product range; (ii) introduce more commercially oriented mortgage lending instruments; (iii) diversify its funding sources; (iv) enhance its customer focus by analyzing consumer trends and preferences; and (v) expand its client base by focusing on self-employed persons located in rural areas, of which women account for more than 60%.

12. HCSBK's mandate and market share. HCSBK is one of the major financial institutions supporting the development of the mortgage finance market in the country and is the main actor implementing government housing programs. Founded in 2003, it follows the German system of contractual savings for housing (the Bausparkassen model), wherein a housing loan is linked to a savings deposit. HCSBK typically targets the low- to middle-income borrower segment as evidenced by the fact that HCSBK's average mortgage size is only T6.2 million. HCSBK provides services to about 12% of the economically active population, or about 1.05 million households. As of 31 December 2018, HCSBK had 1.30 million saving accounts, and it had issued 172,685 loans totaling T1.14 trillion. HCSBK follows prudent onlending practices as evidenced by its satisfactory financial standing and an NPL ratio of less than 1%. As of the end of 2018, HCSBK was the market leader in mortgage lending, with 49% market share in the banking sector's mortgage loan sector. Its 17 branches cover all regions of the country.

13. Housing Construction Savings Bank of Kazakhstan's gender focus. The bank maintains a strong focus on serving the needs of women, who comprised 55.5% of its borrowers at the end of 2018. However, women still represent a largely untapped borrower segment in Kazakhstan even though they have proven to be more disciplined than men in making loan repayments: only 0.2% of all female borrowers have overdue payments of more than 90 days, compared with 0.4% for men. The main obstacle for HCSBK to expand its lending business to women borrowers is the shortage of long-term funding. Further, HCSBK is constrained in its growth and outreach by its business model, which stipulates that sub-borrowers must first accumulate savings that account for at least 50% of the cost of the housing unit before they can qualify for a low-interest mortgage loan from the bank. The financing provided by ADB will be used by HCSBK to provide preliminary loans as an interim solution, as these loans will require the accumulation of savings of only 15% 20% before a mortgage loan can be granted (i.e., women borrowers with a monthly household income below T200,000 will be granted lower down payment requirements). Once the sub-borrowers have accumulated the required 50% savings rate, the preliminary loan will be converted into a regular housing loan with a lower interest rate.

14. Demand for the proposed loan. The proposed loan from ADB to HCSBK will help the bank address the unmet demand among female borrowers for longer-term, fixed-rate, local currency-denominated mortgage credit, in particular in the rural areas. Of Kazakhstan's population, 9.1 million, or 51%, are women and 4.4 million are considered economically active. Over 60,000 of HCSBK's borrowers are women, of which 64% are located outside of the largest two cities of Nur-Sultan and Almaty. Although the government has various social support programs for women in place, HCSBK currently has 30,000 female account holders who have accumulated more than T2 million (qualifying them for a preliminary housing loan subject to meeting other underwriting criteria) who have not yet received a housing loan. In April 2019 as part of the project preparatory activities, HCSBK call centers carried out a survey, which showed that 53% of the female depositors contacted expressed interest in receiving more information on the ADB-funded mortgage product, and 40% would consider applying for a mortgage loan with such a reduced savings requirement.

Impact Gender equity promotion and sustainable economic growth achieved.
Project Outcome
Description of Outcome Acquisition and renovation of housing units by women increased.
Progress Toward Outcome
Implementation Progress
Description of Project Outputs

Long-term affordable mortgage financing for eligible women borrowers made available.

Accessibility to HCSBK's lending products for eligible women borrowers improved

Gender inclusiveness of the banking sector''s housing finance assessed

Status of Implementation Progress (Outputs, Activities, and Issues)
Geographical Location Nation-wide, Kazakhstan
Safeguard Categories
Environment FI-C
Involuntary Resettlement FI-C
Indigenous Peoples FI-C
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design
During Project Implementation
Responsible ADB Officer Song, Dai Chang
Responsible ADB Department Central and West Asia Department
Responsible ADB Division Public Management, Financial Sector and Trade Division, CWRD
Executing Agencies
Housing Construction Savings Bank of Kazakhstan
[email protected]
Republic of Kazakstan, A05A2XO Almaty Abylai Khan Avenue, 91
Timetable
Concept Clearance 08 May 2019
Fact Finding 19 May 2019 to 25 May 2019
MRM 14 Aug 2019
Approval 24 Oct 2019
Last Review Mission -
Last PDS Update 25 Oct 2019

Loan 3841-KAZ

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
24 Oct 2019 15 Nov 2019 23 Nov 2020 30 Jun 2023 - -
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 100.00 Cumulative Contract Awards
ADB 100.00 29 Sep 2021 0.00 0.00 0%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 0.00 29 Sep 2021 20.12 0.00 22%

TA 9834-KAZ

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
24 Oct 2019 21 Nov 2019 21 Nov 2019 31 Dec 2021 - -
Financing Plan/TA Utilization Cumulative Disbursements
ADB Cofinancing Counterpart Total Date Amount
Gov Beneficiaries Project Sponsor Others
620,000.00 0.00 0.00 0.00 0.00 0.00 620,000.00 29 Sep 2021 836.72

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Related Publications

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Tenders

Tender Title Type Status Posting Date Deadline
Promoting Gender Equality in Housing Finance Project - Nat'l Researcher (Statistician) Individual - Consulting Closed 27 Aug 2021 05 Sep 2021
Promoting Gender Equality in Housing Finance Project - Int'l Banking Products and Programs Expert Individual - Consulting Closed 27 Aug 2021 05 Sep 2021
Promoting Gender Equality in Housing Finance Project - Int'l Housing Finance Expert & Team Leader Individual - Consulting Closed 27 Aug 2021 05 Sep 2021
Promoting Gender Equality in Housing Finance Project - Int'l Gender Specialist Individual - Consulting Closed 27 Aug 2021 05 Sep 2021
Promoting Gender Equality in Housing Finance Project - Nat'l Gender Specialist and Program Manager Individual - Consulting Closed 27 Aug 2021 05 Sep 2021

Contracts Awarded

No contracts awarded for this project were found


Procurement Plan

None currently available.