Identifier
Created
Classification
Origin
09ASHGABAT923
2009-07-23 09:29:00
UNCLASSIFIED
Embassy Ashgabat
Cable title:  

TURKMENISTAN: MOST GOVERNMENT WORKERS CANNOT AFFORD TO BUY

Tags:  SOCI ECON PGOV TX 
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UNCLAS SECTION 01 OF 02 ASHGABAT 000923 

SIPDIS

STATE FOR SCA/CEN

E.O. 12958: N/A
TAGS: SOCI ECON PGOV TX
SUBJECT: TURKMENISTAN: MOST GOVERNMENT WORKERS CANNOT AFFORD TO BUY
AN APARTMENT

UNCLAS SECTION 01 OF 02 ASHGABAT 000923

SIPDIS

STATE FOR SCA/CEN

E.O. 12958: N/A
TAGS: SOCI ECON PGOV TX
SUBJECT: TURKMENISTAN: MOST GOVERNMENT WORKERS CANNOT AFFORD TO BUY
AN APARTMENT


1. (U) SUMMARY: President Berdimuhamedov's decree of January 2008
offered long-term mortgage loans to Turkmen citizens to buy elite
apartments and family houses. In a populist move, Berdimuhamedov's
decree extended a fifteen-year loan term, established by his late
predecessor, to thirty years. However, even with the extension of
the payback period, government wages will not allow borrowers to
payback their loans. END SUMMARY.


2. (U) In January 2008, President Berdimuhamedov issued a decree
authorizing banks to provide thirty-year loans at a one percent
interest rate and with a five-year grace period to purchase the
government's elite apartments in Ashgabat, built by Turkish
construction companies. In order to get a loan, a person should be
able to pay thirty percent of the apartment's cost up front.
Employees of government agencies with over five years of service can
purchase apartments at half price. The presidential decree also
allowed rural residents to build a family house by using a
government loan. In both cases, the bank transfers the money to the
construction company and keeps apartments and houses as a mortgage.
Currently, the price of these elite apartments ranges from $200,000
to $300,000 dollars. The price of a family house built at the
expense of the loan is $180,000 - $200,000.


3. (SBU) However, wages in the public sector are not enough to
allow regular citizens to save money for
purchasing apartments and houses, offered by the government. An
average monthly wage in the country is about three million manat or
211 dollars. An Ashgabat real estate agent, who is a friend of
local Pol/Econ staff member, said that an owner of an elite
apartment has to pay back his banking loan in a 10 million manat or
$700 monthly installment over thirty years. In order to pay the
initial payment, people sell the Soviet-style apartments in which
they lived and move temporarily to their relatives until they move
into the elite apartment. Another friend of a local Pol/Econ staff
member, whose daughter got an elite apartment from her employing
agency, said that their joint family income was not enough to pay
the loan and was thinking of selling the apartment in which she
lives now. A 35-year old Ashgabat resident, who applied for the

loan to buy an elite apartment, worried that she wouldn't be able to
pay off the loan until long after she has retired and her pension
would not allow her to make payments. A rural resident told
Pol/Econ local staff that if he uses a government loan for building
a house, he does not have freedom in choosing the construction
company. The government dictates which construction company to
choose. The contact said that the final cost of the house greatly
exceeds the actual expenses which a person will have to bear if he
were to build on his own. A rural resident, who is a relative of a
local Pol/Econ staff member, reported that due to the high level of
unemployment among the rural population, few rural residents are
eligible for the loan because the bank requires stable income to
qualify.


4. (SBU) The government mortgage policy cannot be applied if one
wants to buy a house or apartment on the free market. Free market
prices for second-hand Soviet-style apartments range from $30,000 to
$100,000 depending on the size. Prices for individual houses range
from $100,000 to $160,000.


5. (SBU) Both market prices and government prices for apartments
and houses drastically went up in May 2008, when, following the
government's introduction of a unified dollar/manat exchange rate,
the value of USD dropped from 24,000 manat to 14,250 manat. The
decrease in the exchange rate immediately affected the local realty
market: the price for a single room apartment rocketed from $12,000
(June 2007) to $25,000 (July 2008); the government prices for elite
apartments increased from $85,000-$140,000 to $200,000-$300,000
depending on their size.


6. (SBU) The government's loan policy is ill-conceived. A local
source said that the inability of local residents to pay back their
loans could either result in hundreds of homeless people or a
financial crisis. The source also speculated that eventually the

ASHGABAT 00000923 002 OF 002


government will have to write off the debts of the banks. However,
for the time being, the government does not seem to be worried about
this problem. It is more concerned at this point with filling
Ashgabat's main streets with high-rise marble-clad apartment
buildings, which are supposed to demonstrate the prosperity of the
nation to a foreign visitor.


7. (SBU) COMMENT: For a traditional extended Turkmen family, where
several generations live under a common roof, housing in the past
ten years has become a critical problem. Local people would prefer
that instead of building expensive elite apartments the government
build inexpensive apartments and houses and sell them to the
population at affordable prices. However, lavish kick-backs
received by top government officials from expensive construction
contracts probably ensure that the practice will continue. END
COMMENT.

MILES