Contractual Savings for Housing: A Mortgage Institution for Russia

The paper argues that introduction of сontractual savings for housing (CSH) - bausparkassen and building and loan cooperatives - is an essential institutional stage in the process of mass mortgage market formation. An attempt to skip over it is a costly mistake and almost doomed to failure. Given an active government support CSH become a primary school of saving and loan behavior for millions and an effective tool for selection and education of steady borrowers for the banking system. In a short period of time they allow to increase substantially aggregate savings. CSH facilitate people's access to credit market and its further institutional evolution. To prove these conclusions the authors investigate specific features of housing markets, the role of CSH in development of housing finances in advanced economies, analyze recent experience of East European countries and numerous attempts to create the mortgage market in Russia in 1992-2003.