MOSCOW, May 16. /TASS/. The implementation of preferential mechanisms, used in the Far Eastern Mortgage program, requires additional expenses, estimated at 11.6 billion rubles ($147 million) to 2035, Russia's Minister for Development of the Far East and Arctic Alexey Chekunov told reporters.

The Russian government considers using the program of preferential mortgages across the Russian Federation's entire Arctic Zone. The Ministry for Development of the Far East and Arctic and the Ministry of Construction have been working the new program.

"According to early estimates, <…> the program's wider geography would require additionally from the federal budget 11.6 billion rubles to 2035 (including 4 billion rubles ($51 million) in 2023-2025)," the minister said.

The Far Eastern Mortgage program runs in two Arctic regions - in Yakutia and Chukotka. It began in 2019. Since that time, more than 67,000 families have bought or built new housing using 2% APR loans. Banks have issued loans worth 287 billion rubles ($3.6 billion).

"The state-supported demand for flats stimulates investments in the housing construction both by local companies and by major federal developers. Over the program's 3 years, available housing in the Far Eastern Federal District has increased by 1.6 times - to 3.8 million square meters. The growing offer on the market of newly built houses controls the prices, and their growth in the Far East is almost 1.5 times lower than in the country's other regions (17% against 24% in Q4, 2022, YOY)," the minister said.

Construction in Arctic

The construction potential in the Russian federation's Arctic Zone is 897,000 sq m, and as of April 1, 2023, construction licenses have been issued for about 36,300 sq m, Deputy Minister of Construction Nikita Stasishin told the Federation Council earlier.

According to him, the Arctic regions participate in the urban environment program, receive funds as infrastructure budget loans, and funds from the National Welfare Fund to upgrade municipal infrastructures. The preferential Far Eastern mortgages will stimulate construction in the Arctic, he added. "We have received a task from [Deputy Prime Minister, Presidential Envoy to the Far Eastern Federal District] Yuri Trutnev, and together with the Ministry for Development of the Far East and Arctic and the Finance Ministry we have been working on a program to implement <…> the Far Eastern Mortgage (program) in the Arctic Zone. Our position is that in case funding is allocated, the construction amounts will multiply," he said, adding that "another very important aspect is related to certain categories of people, like in resettlement projects and emergency housing projects."

Feedback from regions

The Murmansk Region's Governor Andrey Chibis told TASS the region had been insisting on the implementation of the Far Eastern Mortgage program in the Arctic. This way, the regions will form the demand for housing, thus cutting construction costs, he explained. Due to the materials logistics and complex soils - rocks and sedimentary soils of the glacial origin - the construction cost of one square meter in the Murmansk Region is about 110,000 - 120,000 rubles ($1,400 - 1,500), which is higher than the market price and which hinders necessary amounts of construction, while the public demand has been growing.

Other Arctic regions also point to high housing costs. "As for construction in the Far North, in the difficult climatic and logistical conditions, it has always been a very expensive process. The realistic construction cost is not comparable even with Moscow," press service of the Norilsk Nickel Company's Polar Division told TASS. The company jointly with the local authorities continues a large-scale renovation of Norilsk in the Krasnoyarsk Region's north.

The Arkhangelsk Region's Governor Alexander Tsybulsky is sure preferential mortgages definitely will be popular, since the current demand is above the offer, and, additionally, there is a certain outflow of population from the region. Commercial housing costs reach 140,000 rubles ($1,770) per one square meter - similar to costs in large cities in Central Russia. Thus, he continued, if young people get the preferential mortgage opportunity on better terms than in other regions, some of them may have reasons to remain working in the North.

According to the Murmansk Region's governor, the Far Eastern Mortgage could be merged with the regional program Your Home in the Arctic, under which families receive up to 1.5 million rubles ($19.000) to buy or build a house. This program runs in the Murmansk Region for almost a year, and has become very popular, he added.

The Murmansk Region's Ministry of Construction told TASS, between 2010 and 2017, the region resettled residents from the housing that had been recognized as emergency before January, 2012. Since April, 2019, the region continues resettling people from such houses, recognized as emergency before January, 2017. As of late March, 2023, under this program the region has resettled 2,400 people from emergency housing of 47,630 square meters.