After the announcement in December 2024 about housing loans for young people amid mass protests across the country, the Government of Serbia adopted a bill enabling this. However, is this idea realistic?
On the agenda of the Government of Serbia on January 16, there was a proposal for a law on loans for shopping apartments for young people, its further adoption in the parliament was announced for February, and its implementation from the beginning of March.
The draft law provides for guarantee schemes and subsidizing part of the interest for the purchase of the first real estate for young people aged 20 to 35 with a minimum participation of one percent of the real estate price.
The banks, which will give such loans, do not want to make a statement about it yet, and only the National Bank of Serbia (NBS) has spoken out, which had to change the regulations in order to enable the implementation of such a scheme.
"The National Bank of Serbia, by adopting by-laws, adjusted the regulatory framework for banks in a timely manner in order to appropriately implement the proposed state program, in such a way that banks, when approving loans within this program, can apply the so-called LTV (loan to value) limit of 99 percent, which means that the participation of the bank's client can be one percent in the financing of the real estate he buys from the loan", it is stated in the written answer of the NBS submitted to "Vremen".
The current participation in housing loans is 20 percent.
Beyond all economic logic
Reducing the participation to one percent goes against the economic logic of granting loans, explains banker and consultant Vladimir Vasić for "Vreme".
"Until now, the rule was that loans can be obtained by permanent employees who have a working experience of at least six months, that the value of the real estate exceeds the value of the loan you take because of the risk zone, which is 20-30 percent." That's why participation in the amount of that percentage was put in place, in case some problems arise, in order to protect that loaned money. In this case, the state has assessed that reducing the percentage of participation is in the interest, in order to facilitate the purchase of these subsidized loans", explains Vasić.
We tried to get an answer to the question of whether and in what way they would accept such a scheme in several commercial and state banks. In some of them we were told that they still do not want to comment on this regulation considering that it has not been adopted yet. The others did not answer.
In the Association of Serbian Banks, they state for "Vreme" that until the adoption of this Law, space should be given to commercial banks to assess when they will join the program of approving housing loans for young people in accordance with their business policy.
They add that we should also take into account the fact that only after the adoption of the Law will all the conditions under which banks will be able to approve housing loans for young people be known in detail.
Mission (Im)possible?
The implementation of such a system of co-financing is possible, Vladimir Vasić, a banker and financial consultant, told Vreme, adding that this is a demographic measure by which the state tries to keep young people in the country.
"Most of the Eastern Bloc countries are trying to find a way to keep young people from leaving." The Balkans is a place where the population has decreased by an average of about 15 percent. One of the ways to keep these people is to offer them the opportunity to solve the housing issue on more favorable terms than commercial ones. This is also an economic measure, because all citizens pay the subsidized price through a loan, but if the benefit is greater than the costs of such an activity, then it is positive", says Vasić.
He adds that it will be up to the banks whether they will accept such a program or not.
"The state bank, which is dominant in this business, will certainly be the first to accept it due to state interest and non-commercial interest, and commercial banks will probably accept it with additional clarifications and procedural definitions, because they will get a client who will be theirs for 20, 30, 40 years." I don't believe that anyone could give up at least one such client", says Vasić.
Banks give money, the state is the guarantor
Banks provide the money, and the state guarantees it, he explains.
"In the event that it is impossible to repay the loan, then the state intervenes." But what is the probability that someone will be unable to pay the installments even in the first year, especially if the installment is less than 100 euros. In that sense, it will not be seen in this year's budget, nor in the next year's budget."
Such a scenario could happen after the sixth year, when the amount of the installment increases to several hundred euros, he adds.
Finance Minister Siniša Mali said at the beginning of January that funds have been secured for the housing loan program for young people, which foresees a guarantee scheme of 400 million euros.
The Ministry of Finance did not respond to "Vremena"'s inquiry from which sources the funds were provided, nor what the detailed plan will look like.
The bank's funds for lending can come from several sources, says Vasić.
"One is the capital of the bank, the other is savings in that bank, and these can be loans from other financial institutions, as well as loans from the state to the bank, which is very rare. Most of the funds in the banking sector today are from savings. The bank transforms funds and directs them to those who need them. This can be seen from the data that the savings of the population is around 14 billion and that is exactly the amount of housing and cash loans", says Vasić.
According to announcements, in the next four years, 5500 housing loans will be approved for the purchase of real estate for young people aged 20 to 35.
Who will be able to take out a loan?
The draft law was adopted by the Government, but in February, according to announcements, it will be on the agenda of the Serbian Parliament.
If adopted, its implementation should begin on March 1, announced Finance Minister Sinisa Mali.
As announced on the website of the Government of Serbia, permanent employees, farmers, self-employed income tax payers and independent artists will be able to apply for this loan, while temporary employees are required to provide a guarantee from a family member upon request.
When it comes to the unemployed, they are obliged to provide a joint guarantee of a creditworthy family member.
Conditions for taking out a loan
The maximum value of the loan that can be taken out will be 100.000 euros, and there is no limit when it comes to the price of real estate, nor the price of square meters per city, it was stated.
The banks' obligations will be to offer clients for real estate up to 100.000 euros a down payment of one percent and a grace period of one year, but each client will have the right to increase the down payment and not use the grace period, as well as to repay the loan early without compensation, in part or in full .
These legal solutions foresee a grace period of one year with a fixed interest rate of 3,5 percent, the state subsidy is two percent, and the interest rate for the user is 1,5 percent.
From the second to the sixth year, the fixed interest rate will be 3,5 percent, the state subsidy will be two percent, and the interest rate for the user will be 1,5 percent. After the sixth year, the interest rate becomes variable.
The repayment period of this loan will be up to 40 years, and at the most up to the age of 70, while the state guarantee is 40 percent until the tenth year of loan repayment.
With the money from this loan, it will be possible to buy a house, an apartment and parts of a residential building that are intended for living, a garage or a garage space, if it is together with the apartment, as well as land with a building permit for the construction of a house, but only registered objects, whether they are in old buildings or new buildings.
It will also be possible to purchase buildings under construction.
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