Muradjon Farmanov: “People Are Ready To Take Long-Term Loans Just to Own Property”
The mortgage housing market in Uzbekistan stands on the brink of major changes. Will these reforms improve the accessibility of housing loans? What steps is the Mortgage Refinancing Company taking to address this? Kursiv Uzbekistan spoke with the company’s CEO, Muradjon Farmanov, to gain insights.
Between inflation and tradition
Over the past five years, property prices in Uzbekistan surged by 80%, while average mortgage rates have increased by 4.6 percentage points, from 22.4% to 27% annually. As a result, housing affordability for most Uzbeks has worsened.
The situation is further complicated by high inflation and rising banking costs.
«Mortgage rates depend not only on state programs but also on banks, which factor in their risks and the cost of borrowed capital. When inflation is high and liquidity is limited in the market, banks must secure funds at high costs, which pushes interest rates up,» explains Muradjon Farmanov.
In other countries, people often choose to rent under such conditions. For example, in Japan, renting is a long-term solution, especially among younger generations.
However, in Uzbekistan, owning property is seen as a long-standing tradition, and renting is considered a temporary option.
«In our culture, owning a home is still regarded as a symbol of stability. People are ready to take on long-term loans just to own property, even if the repayments become unaffordable,» says Farmanov.
As a result, mortgages in Uzbekistan, intended to make homeownership easier, instead become a heavy burden for borrowers.
«Today, a borrower who takes out a 20-year mortgage will end up paying more in interest during the first three to four years than the actual value of the property itself,» the expert highlights.
In the morning – apartments, in the evening – money
The mortgage market in Uzbekistan is gearing up for significant reforms that will affect both lending mechanisms and financial products, says Muradjon Farmanov.
Uzbekistan plans to introduce an escrow account system. Instead of transferring money directly to developers, banks will hold the funds and release them only once construction is complete. This will significantly improve transaction security and protect clients’ interests.
Farmanov explains that, in the past, buyers made direct payments to developers, which carried certain risks. If the project wasn’t completed, buyers could lose their money with no way to recover it.
The introduction of escrow accounts will eliminate such risks. Funds will remain in a dedicated bank account until the property is officially handed over.
This mechanism, widely used in Europe and the USA, will likely increase trust in Uzbekistan’s construction sector.
Securing and digitising
Another key change is the introduction of electronic mortgages, which will simplify transactions and increase market liquidity. In the past, mortgage contracts existed on paper, but now they will become fully digital assets that can be transferred and sold.
Farmanov notes that these electronic mortgages will be stored in a central depository, speeding up investment acquisition for banks.
This will allow financial institutions to quickly sell mortgage loans to investors, freeing up capital for new loans.
In the long term, these changes should enhance market liquidity and make mortgages more accessible.
Let the rate flow
Currently, all mortgages are issued with fixed rates. However, Uzbekistan may introduce floating interest rates tied to market conditions in the future.
«In developed economies, floating rates are common. This can benefit borrowers when rates drop, but it also carries risks if rates rise. For now, Uzbekistan faces high inflation, making such a shift risky. However, over time, floating rates may become a reality,» says Farmanov.
Fixed rates offer borrowers stability, allowing them to plan their repayments with certainty. However, over time, the availability of alternative options will become inevitable.
Apartments for freelancers
Today, banks are reluctant to approve housing loans for freelancers, self-employed individuals, and those who cannot officially verify their income.
The Mortgage Refinancing Company is working on creating a mortgage guarantee mechanism that will allow banks to extend loans to borrowers with undocumented but verified income.
These programs will protect banks from potential losses and encourage them to lend to a broader range of borrowers.
Currently, these programs are in the testing phase, and Farmanov expects their full launch soon.
What the government is doing
The government and financial sector are collaborating to create a national housing finance strategy that will shape the long-term development of the mortgage market.
«By August 1, 2025, we must finalize a long-term strategy to ensure market stability and make housing more affordable to various population groups,» says Farmanov.
According to him, the government will reassess its role in housing construction over the coming years. State-backed mortgage programs will focus on supporting vulnerable populations, while commercial lending will be handled by private banks.
Government resources allocated to banks for mortgage refinancing will be redirected towards long-term loans and interest rate reductions.
Moreover, the focus will shift towards supporting alternative forms of housing finance (rent-to-own schemes, social housing) and developing new mortgage products tailored to different borrower segments.
Market trends
In the coming years, the mortgage market in Uzbekistan will continue to evolve. However, Muradjon Farmanov warns that significant improvements in housing affordability are unlikely in the short term.
He emphasizes that the main driver of change in the market is the country’s economic situation.
«If inflation slows, the key interest rate drops, and people’s incomes rise, mortgages in Uzbekistan will become more affordable. Without these factors, even the best programs will not achieve the desired outcomes,» says the expert.
The more competition there is in the market, the better it will be for borrowers. Increased competition will drive the development of flexible mortgage programs and lower interest rates.
«We expect that, in the next few years, new banks will enter the market offering mortgages with various terms, including longer loan durations,» says Farmanov.
With the introduction of energy efficiency standards, interest in loans for energy-efficient housing is expected to rise.
Farmanov also notes a shift in the demand for housing. Young people and new borrowers are increasingly considering alternative housing options, including renting. However, purchasing property on credit will remain the dominant model.
What the mortgage refinancing company does
Farmanov explains that the Mortgage Refinancing Company helps banks secure resources for mortgage lending. In 2024, the volume of refinanced loans amounted to UZS 4.3 trln. This has led to increased mortgage lending, but it has not reduced interest rates.
«We work with banks to refinance the mortgage portfolios they create. By the end of 2024, the total volume of refinanced mortgage loans exceeded UZS 4 trln, allowing for more accessible loans and improved conditions for borrowers. However, the issue remains that mortgage rates are rising faster than people’s incomes,» says the expert.
Mortgage quotas for women
In addition to refinancing mortgage loans, the Company supports housing loans for women. Since 2020, there has been a requirement to refinance at least 30% of mortgages for women. In 2024, this figure increased to 35%.
«As a quasi-state entity, the Company advocates for women’s interests in the sector by refinancing commercial banks’ mortgage portfolios and ensuring a minimum mortgage quota for women,» Farmanov explains.
He believes this does not mean women face discrimination in mortgage lending.
«Banks do not distinguish between male and female borrowers; they only consider payment capacity. If a woman has a stable income, she will be approved for a mortgage under the same conditions as a man. If her income is insufficient, a co-borrower is required, and this has nothing to do with gender,» he explains.
Green mortgages in Uzbekistan
Another significant area of focus for the Company is promoting sustainable housing. In 2024, the Company issued Uzbekistan’s first green bonds worth UZS 50 bn, which will fund energy-efficient home renovations.
«We’ve launched an interactive platform where borrowers can calculate potential savings on utilities through the installation of energy-efficient windows, home insulation, or replacing old heating systems. However, many people still don’t see the benefits,» says Farmanov.
He links this to the fact that until recently, electricity and heating tariffs were artificially low. As a result, people didn’t consider energy-saving measures. With rising tariffs, interest in green mortgages is starting to emerge, but widespread adoption is still not a reality.
