The European Bank for Reconstruction and Development (EBRD) next month will grant 11.5 million euros to the Romanian-American Mortgage Credit Company, established by the Romanian-American Enterprise Fund (RAEF). Of the total amount, 1.5 million euros account for the EBRD participation in the company's capital (a 20% stake), with the rest of 10 million euros to come as a loan.
The total value of the mortgage company's development project amounts to 27.4 million euros, with 18 million in dollars and 11 million in euros. The EBRD is also set to attract co-financing from other international financial institutions.
The Romanian-American Mortgage Credit Company will use the EBRD funds to grant loans to the natural persons planning to buy, modernise or build houses.
The project also comprises a $2m technical assistance component provided by USAID. The company will be able to offer low rates due to the cheap EBRD financing.
There is no mortgage bank operating on the Romanian market at present, although such a project, worth $20 million, did come up in 1997, when American investors were sought. However, the legal framework for mortgage companies only was only endorsed this year.
The Romanian-American Mortgage Credit Company was set up under a partnership between the Romanian-American Enterprise Fund (RAEF) and Shorebank Advisory Services - the consultancy arm of the US banking corporation Shorebank. USAID also contributed $1.3m to the company's establishment, after RAEF had been capitalised with more than $60 million from the American agency.
The company has already granted some $1m in loans, although interests are rather high. However, with the EBRD financing, the company will be able to offer long-term loans for house buying.
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