TALLINN - KredEx, the state-run credit and export guarantee agency, said last week it was seeking additional governmental support to continue issuing housing loan guarantees to young families.
The problem arose when the agency approached the 700 million kroon (44.7 million euro) limit on housing loans counter-guaranteed by the state.
Unless the government increases this limit, in September KredEx will be forced to stop issuing guarantees for commercial-bank mortgage loans to young families and tenants of restituted buildings.
"Last year the number of young families and young professionals guaranteed beneficiaries amounted to about 6,000. The need for increasing the guarantee limit has been stimulated by the ongoing growth of real estate prices," said Ahti Kuningas, head of the Ministry of Economic Affairs and Communications economic development department.
Earlier this week the ministry sent a draft of amendments to the law on entrepreneurship support and state-issued loan guarantees to other ministries, offering to increase the previous limit to 1.4 billion kroons.
If approved by the government, it will be up to Parliament to enforce the new financial injection.
Termination of the guarantees would severely limit loan opportunities for middle- and low-income households, said KredEx director Maive Rute, who assessed the desirable new limit at 1.6 billion kroons.
According to KredEx, the governmental limit was reached faster than expected due to a boom in housing loans.
Initially the agency, created on the initiative of former President Lennart Meri, helped self-financing fall from 34 percent to 10 percent of the total loan sum in 2000, making real estate purchases more accessable for young families.
By August 2004, about 12,000 young families received loans.
According to Kuningas, the ministry fully supports extending the guarantee limit for KredEx. The director further admitted that, despite more favorable loan conditions offered by commercial banks and an overall growth of salaries, there are still certain demographic groups more concerned about the size of the initial loan payment.
According to Kuningas, the volume of loan guarantees issued to young families and professionals should start decreasing in 2007.
As far as real estate transactions, the number grew dramatically by 20 percent in the second quarter of 2004, reaching 13,426, the Aripaev daily reported. Apartment sale-purchase transactions comprised about 50 percent of this total.
Analysts believe that a number of people and companies hoped to complete their real estate transactions before May 1 due to a new VAT implementation on certain deals.
