14 September 2012Montenegrins will soon be able to save in the country's first building society when it opens in the upcoming months, making the process to obtain loans to buy or renovate housing spaces or purchase construction materials easier and more affordable.
The building societies offer better terms on mortgages than commercial banks, according to Montenegro's Fund for Solidarity in Housing Development, which came up with the idea to launch the initiative.
"Building societies are specialised credit institutions that collect deposits, conduct credits and other activities for the purpose of resolving or improving the housing needs of its clients," Mijat Mijatovic, the fund's representative and co-ordinator of the future building society, told SETimes.
Mijatovic said building societies operate on a principle that the difference between active and passive interest rates must not exceed 3 percent.
Commercial bank loans are available but they are expensive; interest rates vary between 7.5 and 10 percent and the loan period is limited to 10 to 15 years.
Establishing a building society, Mijatovic said, is done to improve the housing opportunities for the middle class and for a citizens who face financial difficulties and are unable to obtain housing under present conditions.
The building society's clients will be required to save for two years prior to applying for mortgage. Those who need to refinance under existing loans from third parties may apply earlier.
Citizens view the establishing of the building society will significantly ease the way to obtain living space, which has become a growing problem for young people.
Slobodanka Vojinovic, 58, a retiree from Plevlja, said there is now a chance her son Vojin may purchase an apartment. She explained the commercial banks refused him a mortgage because of his low salary and his parents' age.
"We can deposit some money but are not creditworthy. If the new building society offers better prices, we will get a chance to take a loan and buy a flat for our son in Podgorica," Vojinovic told SETimes.
Croatia has lead the way in the region by adopting the Law on Housing Savings and State Incentives with which it encouraged savings for the purposes of obtaining housing for all citizens, regardless of their age.
Potential borrowers can save for two, five, seven or 10 years. Family members who save independently can join their money in a family savings plan to aid a single member to obtain a favourable mortgage.
Synergy is the key of the building society success in Croatia, according to Katarina Sobot, chief executive officer of The First Building Society in Zagreb.
"Overall, the building society offers security, a good return on an investment, creates the important habit of saving and allows for housing bargains, housing expansion, renovation or [purchasing] housing equipment," Sobot told SETimes.
Banks in BiH have expressed readiness to establish building societies, but there is no legal framework yet in place to do so.
The situation is similar in Serbia, according to Kaca Lazarevic, director and founder of Alka real estate agency in Belgrade.
"The state should help investments and to negotiate with banks in order to change the current situation where we do have the highest interest rates in the region to at least make them equal to those of our neighbours," Lazarevic told SETimes