Ex-KGB agents assist mortgage boom

Property prices in Moscow are increasing by 15-18% a year

Alex Ritson Reporting from Moscow

In the Soviet era as many as 10 million people at any one time were on waiting lists for a state-owned apartment.

Nowadays an increasing amount of property is privately owned.

Last year 1,200 homes were bought in Russia using a mortgage.

That may sound small in a country of a 150 million people, but in the previous year only 200 mortgages were issued.

Huge potential

The biggest provider of mortgages in Russia is Delta Credit, which handed out 80% of the loans last year.

Chairman James Cook says the long term prospects for growth are unrivalled.

"Just looking at Moscow and the Moscow region, you are looking at an area that in many ways is very close to the population of Poland," Mr Cook says.

Assuming that only 1% of those people were able to get a mortgage, that would equate to a market worth $60bn.

Interest rates are high by international standards, around 14% over a 10-year term.

Kyrill Staradoubtsev from Moscow's PMC real estate company says that's no block to demand because property prices increased by 15-18% a year.

Secure credit

Russia has long been a country where cash is king - most people do not have a credit card, or even a bank account.

They therefore have no provable history of being credit worthy.

But James Cook says that when the former Soviet Union broke up, many KGB people entered the banking system.

"When a credit report is needed on a particular client, these former KGB agents do a full background check - so as a lender we probably get much more than most Western lenders would ever dream of," Mr Cook said

"Sometimes it's probably more information than we would care to know."

With the average flat selling in less than three weeks, would-be buyers need to get their mortgage paperwork completed quickly.

Otherwise they get beaten by someone with a suitcase full of hard cash.