Mortgages and Mortgage Backed Securities

The commercial development of the Russian housing market is a recent
phenomenon. It is however recognised that there is a chronic and long-standing
deficit of residential space in the country. It was estimated that the total demand
for housing in 2003 reached 1.6bn sq.m.
Furthermore, official statistics reveal that:

* 65-75% of Russian citizens would like to improve their housing
conditions.
* 40 m people live in housing units without any facilities and 5 m live in
emergency lodging.
* 89 m sq.m. of housing units need rehabilitation or demolition.

The housing situation started to change when the authorities announced their
priority to provide proper housing for Russian citizens. Economic growth and
rising personal incomes contributed to a boom in real estate that initially started
in Moscow and St Petersburg in the mid-nineties, but ultimately spread to the rest
of the country and stimulated construction of new residential and commercial
property. In addition, the rehabilitation of sub-standard housing should further
stimulate market demand for real estate. Currently, financing for housing
rehabilitation programmes in 2005 could total Rub17 bn.