YEREVAN, September 9. /ARКА/. Martin Galstyan, the Chairman of Armenia’s Central Bank, stated that he finds no grounds for reducing interest rates on mortgage loans.
“All is dictated by supply and demand. In recent years, due to the income tax refund legislation (for repayment of mortgage interest), the construction sector has expanded significantly, leading to a substantial demand for mortgage loans. Under these circumstances, it is inappropriate to anticipate a decrease in rates,” he remarked during a parliamentary session on Tuesday.
The head of the regulatory body explained that interest rates in Armenia are determined by two factors, one being the Central Bank’s refinancing rate, which is presently at 6.75%.
“The second is the government bond market, and subsequently, riskier financial instruments – loans, which should carry an interest rate slightly above that of government instruments. Currently, in Armenia, mortgage interest rates range from 12% to 13%, which is merely 2 percent higher than the rates on 10-year government bonds,” Galstyan elaborated.
Since 2014, Armenia has been implementing a program that allows citizens to reclaim their income tax to repay mortgage interest. Furthermore, this program is exclusively applicable to properties within the primary real estate market, with the housing cost not exceeding 55 million drams, and the VAT refund capped at 1.5 million drams per quarter.
In 2021, the government proposed to discontinue this program in relation to new constructions in Yerevan in order to promote development in the regions.
According to the amendments, the program is not applicable to loans obtained after January 1, 2025, if the property is situated or under construction within the administrative boundaries of Yerevan.
From January 1, 2027, the refund will no longer apply to real estate in the Aragatsotn, Ararat, Armavir, or Kotayk regions, and from 2029 onwards, it will be excluded in other regions, with the exception of the list of border communities designated by the government.
In addition, the maximum amount of income tax refund to cover interest is halved – to 750 thousand drams per quarter. -0-
