The Urban Institute
MANUAL For future implementers of Housing Purchase Certificate Program in Armenia
Prepared by: The Urban Foundation for Sustainable Development
Yerevan 2005
1
Tables of Contents I. Introduction II. Definitions III. HPC Project Implementation Steps 1) Beneficiary Selection and HPC issuance 2) Housing Sales Transaction Annexes:
2
Introduction The purpose of this manual is to propose a model for the implementation of Housing Purchase Certificate (HPC) programs. It was prepared taking into account the experience acquired during implementation of the United States Agency for International Development (USAID) funded Armenia Earth Quake Zone Reconstruction Program (EQZRP), and the subsequent provision of technical assistance to the Government of Armenia’s HPC project. For the latter, the HPCs were funded from the 2005 state budget and the technical assistance was provided by the Urban Foundation as an extension of the EQZRP. This manual is prescribed for use by governments or other donors who intend to conduct HPC programs. The program implementer (i.e., program manager) can be donor or a contracted entity. In either case, before starting the project, the implementer and its partners should be trained based on the guidelines of this manual. The HPC program model described herein has two interdependent components: institutional and programmatic. In the next two sections, these components will be discussed, in-turn. Institutional component This section names and describes the activities of the various institutional entities participating in project implementation. During implementation of the Armenia EQZRP, it was useful to assign activities to separate entities rather than the program manager doing everything. Where possible, this approach is highly recommended, while ensuring close cooperation amongst the players under the guidance of the program manager. The entities are: 1.
Program manager Responsible for overall implementation of the program. The program manager should have teams of staff members dedicated particular functions, as described below. 
Beneficiary management staff This group ensures proper beneficiary outreach, conducts public meetings and individual interviews, coordinates the activities of subcontracted nongovernmental organizations (NGOs), and tracks sales transaction processes in close coordination with partner banks.

Information center staff This group collects information, manages the program database, tracks program progress and disseminates information as necessary. Among other specific tasks, this may include: preparing various lists of beneficiaries by classification; preparing and distributing official notices; maintaining a listing of housing units for sale; performing data analysis at the direction of the program manager; distributing materials containing public 3
information about the program; answering basic questions for walk-in visitors regarding the program; accepting applications and assisting in proper completion of applications; receiving and registering letters addressed to the program manager; accepting, and, registering beneficiary appeal forms. This department also screens walk-in visitors who are seeking to be added to the list of persons eligible to apply for benefits. During this process, staff members provide each visitor a check-list of eligibility criteria (Annex 1). The visitor places check marks against the criterion he/she meets. To be eligible the visitor should meet all criteria on the check list. If a visitor wishes to appeal a decision not to allow him or her to apply, then, the information center staff appoints for the person an individual meeting with the beneficiary management staff. 2.
Subcontractor NGOs These NGOs conduct community outreach, ensure two-way communication between beneficiaries and the program manager. They also provide administrative support to the program manager, and assist beneficiaries during the home search and sales transaction phases (Annex 2).
3.
Credit organizations These are banks or other lending institutions which provide mortgage loans to beneficiaries to supplement the value of their HPC. This activity is conducted in close coordination with the Program Manager.
4.
Document Reviewer This can be either an individual or a juridical entity which/who performs document audits at two points during the process of certificate issuance and redemption: after applicants have completed their individual interview, and before the housing sales agreement is singed and notarized. Each applicant’s set of documentation must pass an audit before the HPC is issued, and before it is redeemed.
5. Housing Inspector This organization inspects each house proposed for purchase with an HPC to ensure that it meets program criteria for sound housing. The inspector reports the results to the Program Manager. The relationship of the organizations/individuals with roles in the HPC program implementation are shown in the diagram, below.
4
STRUCTURE OF HOUSING PURCHASE CERTIFICATE PROGRAMS
Donor
Program Manager
Sub-contracts
Program Staff
Document Reviewer
Beneficiary Management Staff
Information Center Staff
Grants Management Staff
Orientation Sessions
Information collection and disseminatio n Public Relations Campaign Database Management and Tracking
Grants funds transfer and Sales Transaction phase monitoring
Individual Interviews Technical Reporting
Statistical Reporting
Grants funds budget tracking and analysis
Sub-contractor NGO’s
Housing physical inspection
Banks/Credit Organizations
Beneficiary Outreach
Home Search/Transa ction Phase Assistance
Administrative Support
Financial reporting 5
Programmatic component The actions undertaken by the various implementing entities comprise the programmatic component. In this section, these actions are listed and discussed in order of occurrence during program implementation. 1.
The basis for starting HPC programs should be legal documents between the key actors. The central actor is typically a governmental entity that has the responsibility of providing housing to some group of citizens. The government may implement the program itself, or choose to employ an outside entity as program manager. Finally, the government may receive financial assistance from a donor organization, which may also be active in overseeing the work of the program manager. In the case of the Armenia EQZRP, a memorandum of understanding was signed between USAID (the donor) and the Government of Armenia. The Urban Institute (program manager), had a separate contract with USAID. In the Government of Armenia’s HPC project, a government ministry acted as the program manager which had a written agreement with the Urban Foundation for technical assistance. Whomever the actors, it is important that the documents clearly state the responsibilities of the parties during the program implementation.
2.
Once the legal document is signed, general criteria of eligibility for beneficiaries are established. In the case of the Armenia EQZRP, households who met the following criteria were considered eligible to receive HPCs: 1) unsheltered (currently displaced due to a natural disaster, or living in unsuitable buildings); 2) not previously compensated by the government or a donor organization at the moment of program implementation; and, 3) not having registered ownership rights in other housing.
3.
Prior to beginning work directly with beneficiaries, the government (relevant ministry, agency or local government body) provides an officially approved (signed, stamped and dated) list of beneficiaries (e.g., earthquake displaced, internally displaced, refugees, landslide victims, residents in damaged buildings, etc.). Included in the information about each beneficiary should be the number of household members, size of housing unit to which he beneficiary is entitled, information about their current temporary residence, and information about any residential real estate to which the beneficiary has ownership rights.
4.
The beneficiary management staff opens a case-file in the name of each beneficiary household. This file is the repository for all documents
6
relating to that individual throughout the HPC issuance and redemption process. 5.
After receiving official information from the government, the information center develops an electronic database for tracking beneficiary selection and sales transaction processes. A sample data sheet with necessary information to be filled out is attached (Annex 3).
6.
The program manager prepares a schedule for the beneficiary management phase (Annex 4).
7.
The beneficiary management staff sends written invitations (Annex 5) to the preliminarily-eligible households, inviting them to an orientation meeting. It is sometimes most practical to invite all residents of entire neighborhoods or multi-unit apartment buildings to the orientation meeting before the determination of preliminary eligibility has been made. In such cases, it should be clearly explained during the meeting who is deemed eligible and why some households may be excluded. at the meeting information packets (Annex 6) which explain program procedures are also distributed.
8.
NGOs deliver invitation letters for the orientation meeting to the households and ask the households member to sign for receipt in the sign-up sheet (Annex 7).
9.
During the orientation meeting, the beneficiary management staff explains the rules for applying to the program. During the meeting, the staff explains what documentation is to be submitted to the program manager along with the application form. The submitted application form will serve to certify that a household agrees to participate in the program.
10. The deadline for application submission must be mentioned clearly, and should be set at least 7-8 months before the end of the project and or a fiscal year, whichever come first (to allow time for issuance and redemption of the HPCs). 11. To encourage timely submission of applications, the program manager conducts a public information campaign reminding beneficiaries about the application submission deadline the benefits of the HPC:
redemption of certificates for housing in any geographic location; cash for discretionary re-circulation; increased demand for sellers of housing units; the potential of receiving a cash refund for the un-used portion of a redeemed HPC; and,
7

an immediate solution to housing problems as opposed to waiting for new construction.
12. The information center receives and registers applications by the specified deadline, and passes them to the beneficiary management staff. 13.
The beneficiary management staff places the application into the respective case-file.
14. The information center informs beneficiaries of the date and time of individual interviews based on a schedule provided by the beneficiary management staff and provides the list of documents that the beneficiary should bring to the interview. Beneficiaries may only submit original documents during the interview. 15. If a particular household’s documents are incomplete (e.g., one of household members is outside the country and a power of attorney is required for application processing), the information center staff informs the household as to which documents are missing and helps to facilitate completion of documentation, while assigning a date and time for a repeat interview. 16. The beneficiary management staff conducts the individual interviews based on the initially set schedule. The schedule should be followed strictly, and interviews should be conducted in a polite manner using courteous behavior. Interviewers examine the documents presented by the beneficiaries; check the validity of the documentation; prepare a document folder and propose an amount of compensation based upon on the rules set out by the program. If interviewers are uncertain about a particular household’s eligibility and or compensation amount, they refer the case to the program manager for a decision and assign another interview for the household. 17. If the beneficiary agrees with the amount of compensation, the beneficiary management staff continues with step number 20 . 18. If the beneficiary does not agree with the proposed amount of compensation, he/she within 3 days, should submit an appeal form (Annex 8) addressed to the program manager. The forms are made available at the information center, and when submitted should be accompanied any relevant supporting documentation. 19. The program manager answers the appeal within one week of receipt. The answer is conveyed via the information center. If the answer is positive, the beneficiary continues the process with step 20.
8
20. NGOs make copies of original documents and provide to the beneficiary management staff. 21. The beneficiary management staff prepares an interview protocol (Annex 9), which includes the names of the household’s members, who along with the future certificate holder shall be on the title of the newly purchased apartment. The protocol is signed by the interviewer and the beneficiary. The latter’s signature signifies agreement to participate in the program. 22. A beneficiary household’s case-file is provided to the document reviewer who reviews it within 2 days and presents comments and recommendations to the program manager based on the items in the checklist (Annex 10). The program manager makes the final decision on HPC issuance based on this review. 23. The completed reviewer checklist is added to the household’s case-file by the beneficiary management staff. 24. The information center staff within 2 days prepares an agreement to be signed between the members of the approved beneficiary household and the government (Annex 11). Note that in the Armenia EQZRP the agreement was signed between the municipal government head and the household members. In the Government of Armenia’s HPC program the agreement was signed between the regional governor and household members. The date of signing is coordinated with the government. 25. The information center staff prepares lists of approved beneficiaries and provides them to the NGOs who contact them for signing the agreement. 26. NGOs, within one day, notify beneficiaries about the date of the agreement signing and remind them to ensure that all household members are present for the event. Agreements are signed in two originals: one for the government and the other for the beneficiary household. The program manager receives a copy of the agreement. 27. Based on the signed agreement, the beneficiary management staff fills out a housing purchase certificate blank form with the following information: name and passport data of certificate holder, certificate number, issuance date and expiration date. The program manager signs the certificate.
9
28.
Three days after signing the agreement, NGOs notify beneficiaries of certificate issuance.
29. The beneficiary management staff issues certificates and conducts orientation meetings explaining to beneficiaries the steps of the housing-purchase transaction stage. A copy of the issued certificate is kept in the files. The deadline for issuing certificates should be no later than 6 months before the project end date or fiscal year, whichever is earlier. 30. The information center staff accepts applications from beneficiaries for home-search assistance and makes available to all certificate holders a listing of housing units for sale. 31. The beneficiary management staff assigns NGO representatives to assist beneficiaries who submitted applications for home-search and or housing purchase assistance. 32.
The information center staff prepares a master log for certificates holders and submits for the approval of the program manager. The master log includes the following information: 1) name of the certificate holder and all family members; 2) passport data of the certificate holder and all family members (number, serial number, date-of-issuance, and issuing institution); 3) certificate number; 4) number of rooms of housing unit; 5) monetary value; and, 6) certificate issuance and expiration dates.
33. The certificate holder may authorize another person to represent his or her interests. In such cases, the authorized person presents to the program financial specialist the following documents: 1) his or her passport; and, 2) power of attorney (prepared in a prescribed manner) for representing the interests of the certificate holder. 34.
When the certificate holder has selected a housing unit, he or she and the seller come to the bank to start the program process. At this point, the program financial specialist will explain to the seller the terms and conditions of the program relating to the housing purchase transaction.
35. The Certificate Holder should submit the Project Financial Specialist a bank statement certifying opening of current bank account on his/her name. The banks statement should include the factual number of the
10
banks account. The Seller opens a current account (for demand deposits) for receipt of payment for the housing unit.. 36. The certificate holder should agree with the seller on the price and other terms which must conform to program requirements. Specifically, the number of rooms in the apartment to be purchased must be no fewer than the number indicated on the certificate (shown in square meters) as specified by the program manager (Annex 12). The seller must have documents proving clear title to the apartment being sold along with other legal documents; and, all of the family members listed in the master log must be included in the sales documents. 37. The agreed upon price and other terms should be stated in the presales agreement (Annex 13) which should be signed by both parties and submitted to the program financial specialist, together with a copy of the seller’s certificate-of-ownership. The presales agreement, as well as any other document related to the housing purchase transaction, may not include a term for pre-payment or down-payment. In order to prevent mistakes in the drafting of the presales agreement and to facilitate the preliminary analyses of the selected apartment, it is recommended that the certificate holder and seller meet with the program financial specialist to fill-out the presales agreement and to have him or her examine the certificate-of-ownership. 38. The financial specialist examines the presales agreement for compliance with the terms and conditions of the program. 39. Copies of each the presales agreement and the seller’s certificate-ofownership is placed in the certificate holder’s case-file.
40. Upon verification that the presales agreement complies with the project requirements, the program financial specialist notifies the housing inspector. The inspector will inspect the housing unit within 3 working days. 41. The inspector invites the housing the seller and certificate holder to be present during the inspection. Attendance of the certificate holder is mandatory. The expert completes the housing inspection finding (Annex 14) which declares the acceptability or unacceptability of the housing unit relative to program requirements. The finding is signed by the inspector and the certificate holder, and the original is placed in the certificate holder’s case-file. If the housing unit is found acceptable, then proceed to the next step, if not, then the certificate holder must select a different housing unit.
11
42. Within two business days after completion of the housing inspection finding, the financial specialist notifies the seller that he or she should acquire a certificate on real estate. Within two business days of receiving this notification, the seller must submit his or her application to receive a certificate to the regional state cadastre department. 43. If the law requires that a person or persons besides the seller (e.g., coowners or other persons who are officially registered as residents of the property being sold) must grant permission for the sale, then the seller must obtain a written agreement for sale of the apartment (“coowners agreement”) which is signed by that person(s). This agreement (if applicable) should be notarized and presented to the financial specialist, along with the certificate on real estate, within two days of receiving the latter document from the regional state cadastre department. 44. A copy of the certificate on real estate and co-owners agreement is placed in the certificate holder’s folder. 45. Within 1 business day of receiving the certificate on real estate and the co-owners agreement, the financial specialist examines all juridical documents presented to this point (certificate of ownership, certificate on real estate, co-owners agreement, and presales agreement). 46. In the process of this examination, the financial specialist should determine: that the seller, has the right to alienate the real estate in question; that the subject housing unit is registered as real estate with the regional state cadastre department; the existence of the ownership rights in the housing unit to be alienated; the presence/absence of any restrictions upon the housing unit to be alienated; the presence/absence of ownership rights of third parties to the housing unit to be alienated; in the case when third parties have ownership rights in the housing unit to be alienated, then it should be verified that the appropriate documents exist by which those third parties have granted permission for sale; that all of the members of the family of the certificate holder are also mentioned as co-buyers in the presales agreement; and, that the seller has submitted a bank statement certifying the opening of a current account in his/her name.
12
47. If the juridical documents are accepted, then proceed to the next step. If discrepancies are noted, the financial specialist notifies the certificate holder and the housing seller immediately and requires them to perform corrections within seven business days. 48. The financial specialist creates a documents examination finding (Annex 15) which is placed in the certificate holder’s case-file. 49. Based on the housing inspection finding, and the documents inspection finding, the financial specialist prepares the acceptance/rejection declaration for the housing unit. 50. The declaration should be signed by the financial specialist. In case of rejection, the it should include an explanation of the rejection. In addition, the certificate holder has the right to select another housing unit and to provide to the financial specialist a new presales agreement or to correct the discrepancies that were the grounds for rejection. 51. A copy of the declaration is placed in the certificate holder’s case-file. 52. The document reviewer examines the copies of specified documents provided by the financial specialist for consistency with one another and with the master log, and for compliance with general program requirements. 53. Within two business days of completing the acceptance/rejection declaration (in the case of acceptance) the financial specialist prepares a request for approval of housing purchase and provides it to the document reviewer with the following documents: 1) 2) 3) 4) 5) 6) 7) 8) 9)
a copy of the presales agreement; a copy of the acceptance/rejection declaration; a copy of the housing inspection finding; a copy of the documents examination finding; a copy of the certificate-of-ownership of the seller; a copy of the certificate on real estate (initial information), a copy co-owners agreement(s); a copy of the housing certificate, and; a copy of the bank statement, which certifies the opening of the current account in the name of seller.
54. A copy of the request for approval of housing purchase is placed in the certificate holder’s case-file. 55. If the certificate holder and/or seller of the housing chooses to continue the housing purchase transaction steps, then the financial specialist
13
should go to Step 59. If the certificate holder and/or seller of the housing chooses not to carry out the housing purchase transaction at any time before the signing of the sale agreement, then the following actions are undertaken: 1) xx; 2) xx, and; 3) xx. 56. The certificate holder provides an application for revocation of presales agreement which specifies the initiator of the revocation. 57. A copy of the application for revocation is placed in the certificate holder’s case-file. 58. Within two business days after receiving the application for revocation, the financial specialist provides a copy to the project manager. 59. Within 3 business days of submitting the request for approval of housing purchase, the financial specialist receives from the document reviewer the decision on concurrence/non-concurrence for funding the housing purchase transaction. In the case of non-concurrence, the decision should include written justification from the document reviewer. Again, in the case of non-concurrence, the certificate holder has the right to select another housing unit and to provide to the financial specialist a new presales agreement.
60. A copy of the decision on concurrence/non-concurrence is placed in the certificate holder’s case-file. 61. Within three business days of receiving the decision on concurrence from the document reviewer, the financial specialist informs the seller that he or she should obtain a certificate on real estate (the cadastre department’s form for real estate transactions which certifies that the housing unit has not been placed as collateral, is not subject to restrictions, and is free of claims by third parties). The financial specialist checks the information for consistency with that initially received about the real estate. 62. If the datum in both certificates are identical, the certificate holder and the seller, with assistance from the financial specialist, complete a sales agreement (Annex 16). The financial specialist should make sure that exactly the same conditions, deadlines and persons party to the presales agreement submitted to the document reviewer exist in the sales agreement.
14
63. After reviewing the sales agreement, the financial specialist instructs the certificate holder to visit the notary to clarify all arrangements that must be made for conducting the final transaction. The certificate holder should take with him or her: a draft of the sales agreement, the certificate on real estate (which certifies that the apartment is not placed as a collateral, no restrictions are imposed on it and that it is free of claims by third parties, and also gives information about the number of number of rooms and size of floor space of the apartment), and the certificate of ownership of the seller. 64. The certificate holder and seller are responsible for making all preparations in a timely manner so that the sales agreement can be notarized before expiration (15 calendar days) of the certificate on real estate. 65. When all preparations are completed, The certificate holder and seller should notify the financial specialist. 66. The seller of the housing unit, co-owners and third party or parties, who must provide their concurrence for sale of the housing unit and the certificate holder conclude the sales agreement at the notary. The bank representative will verify once more that the conditions of the sales agreement do not differ from the conditions of the presales agreement. A condition of the sales agreement is that the version provided to the financial specialist before notarization cannot differ from the notarized version. 67. A copy of the notarized sales agreement and a copy of the certificate on real estate is placed in the certificate holder’s case-file. 68. Upon receipt of the notarized sales agreement, the financial specialist will provide to the document reviewer a request for funds transfer to the certificate holder’s blocked bank account. The request should specify the amount of the subsidy, and the current account number of the seller. Attached to the request, should be the following documents: 1) a copy of the notarized sales agreement, and ; 2) a copy of the certificate on real estate. 69. A copy of the request for funds transfer is placed in the certificate holder’s case-file. 70. The document reviewer provides its conclusion to the financial specialist regarding transfer of funds within 3 business days after receipt of a copy of the notarized sales agreement and the request for funds transfer.
15
71. The next business day, after receiving the document reviewer’s positive conclusion regarding transfer of funds, the certificate holder and the seller formally apply to the regional state cadastre department for registration of the sales agreement, transfer of title, and issuance of the certificate of ownership. 72. The certificate holder presents the certificate of ownership to the financial specialist immediately upon issuance from the cadastre department, but not later than 20 days after submission of the sales agreement to the cadastre department. 73. The seller submits to the financial specialist documents which certify that there are no debts for public untilities connected to the purchased apartment, as well as a certificate signifying agreement for sale by all persons who were registered in the apartment before its sale. 74. One copy of the certificate of ownership is placed in the certificate holder’s case-file. 75. The project financial specialist transfers 100% of the apartment sales price to the seller’s bank account, the number of which is mentioned in the notarized sales agreement. 76. If the apartment sales price is lower than the subsidy amount, in order to receive the remainder of the subsidy funds, the certificate holder should open a current bank account in his/her name in any registered bank of the Republic of Armenia. The certificate holder should submit to the financial specialist a bank statement certifying the opening of a current account in his/her name. The bank statement should include the name of the certificate holder and his/her current bank account number. 77. The certificate holder should complete and sign an application for receiving the remainder of the subsidy funds and submit it to the financial specialist. 78. The finance specialist submits to the project manager an application for receiving the remainder of the subsidy funds which should indicate the sum to be paid and the certificate holder’s bank account number. 79. The finance specialist transfers the remainder of the subsidy funds to the bank account of the certificate holder.
16
80. After receiving the certificate of ownership, the financial specialist instructs the real estate registration agency to impose a two-year resale restriction on the purchased housing unit. 81. The certificate holder submits to the financial specialist the original HPC along with the certificate of ownership,. The financial specialist completes, signs and stamps the receipt stub of the certificate. 82. The receipt stub is removed, a photocopy is made for the financial specialist’s records and the original is given to the certificate holder. The HPC is kept by the financial specialist. 83. The receipt stub copy and the original HPC are placed in the certificate holder’s case-file. 84. If the certificate holder wants to purchase an apartment having a price higher than the certificate value, he/she can apply for a mortgage loan. 85. The project manager signs an agreement with banks and/or other credit organizations to provide mortgage loans for project beneficiaries by paying agreed amount for each beneficiary. 86. Beneficiaries who want to receive a mortgage loan should submit an application to the project manager and attach relevant documents demonstrating the his/her creditworthiness. 87. If the project manager considers the submitted grounds sufficient, it refers the application to a particpating bank or credit organization for provision of a mortgage loan to the project beneficiary based on the attached mortgage loan agreement (Annex 17). 88. If the certificate holder does not present to the finance specialist within three months of the certificate issuance date a sales agreement that has been approved by the document reviewer, he or she may apply to the financial specialist to extend the validity of his or her certificate up to three additional months. The project manager issues a decision on extension request stating the new expiration date. 89. A copy of the decision on extension request is placed in the certificate holder’s case-file. 90. When the certificate holder presents the extended housing certificate to the project financial specialist, the latter updates the expiration date in the space provided on the certificate.
17
91. A given certificate may be issued only one time. In the case of a lost certificate, the certificate holder will not be given a duplicate certificate. The certificate holder should submit an application for replacement certificate to the finance specialist. The finance specialist will void the lost certificate and will issue a replacement certificate with a new number, which will be provided to the certificate holder with the same specifications as the original (i.e., subsidy amount, expiration date etc.). 92. The new certificate will be clearly marked “replacement,� and will indicate the number and serial number of the lost certificate. 93. The finance specialist should submit weekly reports to the program manager about the project implementation.
18
MOU/GOAM Decision
Receiving and filing applications
Folder for each HH is opened
Agreement to be signed with Government is prepared
NGOs inform HH’s about the date of signing
Project criteria are set
Promotion of application submission through public information campaign
Informing about date and time of individual interviews
Reviewer’s checklist is added to HH case-file
Beneficiaries sign Agreement
Official information about HH’s is received from Government Application submission process
Assistance in completion of documentation
Reviewer reviews folders
HPCs are prepared for issuance
Electronic database for tracking is developed
Orientation Meetings
Individual interviews Decision on eligibility and compensation
Interview protocol is completed
NGOs inform HHs about HPC issuance date
Beneficiary Selection Schedule is prepared
NGOs deliver invitations
Invitations for orientation are prepared
Orientation packages are prepared
Beneficiary disagrees with decision
Appeal to the Project Manager
Beneficiary agrees with decision
Program Manager’s response
NGOs make copies of documents
In case of positive response
HPCs are issued
Master log of certificate holders is prepared
19
B E N E F C I A R Y
S E L E C T I O N
Orientations session about sales transaction phase
Applications for home search
The Certificate of Real Estate is submitted to the Project Manager/Financial Specialist Juridical Expertise by the Project Manager/ Financial Specialist
NGOs assist in home search
Seller receives the Certificate on Real Estate
Package is sent for independent reviewer for review
2-year re-sale restriction is imposed based on Government Decision
Sales price is transferred to the current account of the Seller
Housing unit is found
Seller applies to Cadastre for Real Estate Certificate (Spravka #2)
Independent reviewer sends the package back to the Project Manager
Copy of Certificate of Ownership is provided to the Project Manager/Financial Specialist
Remainder (if any ) is transferred to the current account of the Buyer
Sellers brings agreements of co-owners about the sale Request for final Certificate about real estate (Spravka #1)
Sales contract is registered in cadastre
The original of the HPC is submitted to the Project Manager
Seller and Buyer are informed about terms and conditions of sales
Acceptance of Housing Unit
Sales package is reviewed by the independent Reviewer
Pre-sales agreement is signed
Technical Inspection of Housing Unit
Sales Agreement is completed
All arrangements are clarified at notary Sales Agreement is concluded
H O U S I N G S A L E S T R A N Z A C T I O N S T E P S
The Receipt Stub is removed and provided to the Buyer
20
Lessons Learned - EQZRP 1. Testing the program with a pilot application is strongly recommended. Implementation of a pilot program in the range of 100-50 certificates is important for more than shaking down program procedures, although this is indeed important. The pilot permits an early reading on the responsiveness of unit owners to the prices offered in the program—the elasticity of housing supply. Very importantly, it permits the program to establish a positive reputation before trying to operate at a high level of certificate issuance. Seller acceptance of the program, especially trusting that they will be paid for their unit if they sell to a program-supported buyer, is critical to success. Therefore, in addition to the public information campaign to launch the program, strong PR events, featuring unit sales transactions and sellers being paid, pave the way for the larger program to succeed. 2. Administrative complexity. An HPC program is moderately complex. There are several distinct actors—those selecting the beneficiaries, banks, the realty firm developing the price information, NGOs assisting certificate holders to find a unit, and the final-stage reviewer—whose actions must be coordinated and actively monitored. The overall manager has a challenging job, but it is certainly within the competence of strongest organizations in most countries. Even with the benefit of the experience from past projects and the manuals for banks, document reviews, applicant intake and other functions, international implementers will still be needed, probably full-time for the first six to nine months and on a regular short-term basis thereafter. During start-up, organizational and technical skills will be critical. Then and later on they will serve as quality control monitors, help work out needed program adjustments, and serve as some defense against officials trying to obtain favorable treatment from local staff. 3. Banks proved effective in executing several administrative tasks, in addition to disbursing funds to the seller at the time of closing. Because the flow of transactions is highly uncertain and quite variable over time, outsourcing these tasks on a fixed-price-per-transaction basis was more efficient than expanding the project staff to perform the same tasks. 4. Managing the supply of units for sale. A common concern is that, unless there is an adequate supply of housing on the market, HPCs will drive up housing prices. This is a legitimate concern. Indeed, both in Russia and Armenia, HPC pilot programs were initiated to test if there would be a sufficient supply response to the effective housing demand created by the program. In fact, in both the pilot and main programs the supply response was larger than anticipated. One of the main results of these programs and others is the documentation of the high degree of supply responsiveness from the existing housing stock. In the countries of the former Soviet bloc, housing privatization transferred an enormous amount of wealth from the state to households. But this wealth is in an illiquid form. Many families are “house rich and cash poor.” That is, among 21
the parents and their adult children several units may be owned; and it would be possible to rearrange the family members among the units to free one for sale. In this circumstance, an HPC program encourages families to reconsider their housing-and-income strategy. Units are placed on offer as families decide to own less housing in order to obtain cash. In some cases the cash goes to starting or supporting a new business; often it simply goes to help the family with everyday expenses. While relying on market responses to the demand generated by the HPCs is effective to a degree, well-timed interventions by program managers are critical to ensuring a continuing adequate supply of units. Managers have four tools at their disposal to expand the volume of units on offer: 1. Increase the value of the certificate, i.e., raise the price that a seller will receive; 2. Adjust the dwelling size and quality standards to permit more units to qualify; 3. Channel certificate holders to look in locations where supply is more plentiful and perhaps prices are lower than in the main market area; and, 4. Adjust the volume of certificates being issued each month to adjust demand pressure. In the EQZ program, supply was adequate in some of the ten urban areas where the HPCs were issued, and no adjustments to initial program parameters were made. In other areas, foremost Gyumri, supply was an issue; program managers employed the first three adjustments to keep supply adequate to meet the very large incremental demand created by the program. Certificate values (the price the program would pay for a unit) were raised once in three sites (Shirak Marz, Aparan, and Spitak), in the face of sharp increases in prices that drove up the rate at which certificates were expiring, i.e., certificate holders were not able to find a suitable unit. Managers avoided further price adjustments, however, to conserve program funds and thereby serve more beneficiaries. Instead, as described in the component report, some adjustments were made to dwelling standards. In Gyumri the program worked with certificate holders so that they sought a unit in areas other than center city. This combination of actions proved successful. 5. Ensuring interest by eligible households. -
The “shopping incentive� (the potential for keeping the remainder if the purchased apartment costs less than the certificate value) both stimulated client interest and helped stabilize real estate prices.
-
The provisions of search assistance and help with the unit purchase transaction by NGOs to certificate holders were effective in broadening the 22
range of units considered by purchasers and in making the purchase process less daunting. -
Potential clients’ interest in the program was maintained by the program’s reputation for fairness. For example, each applicant found not to be eligible was given a written explanation of the reason for rejection.
-
Information is critical. The program maintained an active public relations campaign, including a monthly television program in the project area, to keep clients informed about changes in the program and to remind potential applicants of the benefits of participating in the program. This was important throughout program implementation, but particularly so in the final phase when the campaign was designed to stress that this was the “last chance” to participate.
6. Government policy. Another important factor, not formally part of the program, are government policies affecting the program’s ability to work efficiently. In Armenia, the program was badly undermined by the government decision to construct several hundred high-quality new units to serve the same population of eligible households in Gyumri and Spitak, units clearly superior to what could be acquired with an HPC. While the government’s desire to accept this generous gift is understandable, the timing was very unfortunate. The impact of the new housing would have been less destructive for the HPC program if the new units had been quickly assigned to families, but this was not the case. The lesson is clear: the involved governments should not introduce competing housing solutions for the same population while an HPC program is under implementation. If they do, then they should identify the beneficiaries quickly and without changes. 7. Government as part of the implementation team. Local governments were assigned a number of responsibilities within the program such as confirming the eligibility of applicants, registering unit sales, and ensuring that after a beneficiary had purchased a dwelling its domic was removed and destroyed. These are all tasks that are squarely within local governments’ competence. While these services were adequately provided overall, there were backlogs at times. The program executed tripartite (USAID, the city, and GOAM) agreements that spelled out a city’s responsibilities. These proved valuable in pressing the cities when necessary. But at least as important was pressure from the responsible marzpet. One clear lesson is for the program to avoid taking on responsibilities that clearly belong to the local government, a temptation that arises when delays become lengthy and persistent. Now let us discuss the lessons learned during the implementation of GOAM HPC project. 1. First of all, during the implementation of HPC projects under the Government funding all the aforementioned lessons should be taken into consideration, since they are of generic character for all donors. 23
2. Existence of a flexible legal basis: Governments decisions regarding the implementation of HPC projects should be flexible to give an opportunity to the decision making body based on the recommendation of the project implementer flexibly and quickly adapt the procedures to the real conditions. Approving procedures of such kind of projects like HPC project, which are connected with the periodically changed market processes, by the Government decisions, make it difficult to quickly respond to the required changes (since making changes in Government decisions is complex and time consuming process by itself, and making changes in the same decision for several times is impossible in practice). 3. Ensuring applying equal conditions and universal approach for all beneficiaries: During the project implementation, equal conditions should be established for all beneficiaries. No exceptional approach should be applied. For instance, during the implementation of the GOAM HPC Project, some changes were made in the eligibility criteria: only part of the earthquake displaced households, who once had received HPCs and were unsuccessful in purchasing a housing unit, were considered as eligible for the project, and only part of the earthquake displaced households who had some members received the earthquake compensation before, were considered eligible to participated in the project. Other earthquake displaced, uncompensated households under the named categories were not considered eligible to participate in GOAM project. If the Program Manager adopts a decision, which differs from the project criteria, that decision further should become applicable for all project beneficiaries. 4. Checking the circumstance of holding residential real estate with ownership rights at local cadastral offices: During the implementation of GOAM project, it became clear that the circumstance of holding residential real estate with ownership rights by the project applicants should be changed not at local real estate cadastral offices throughout Armenia but at those regions were the project is implemented, unless a unified electronic network among all local real estate cadastral offices is in place. In general, from the perspective of efficient beneficiary management it is recommended to request official information about beneficiaries from relevant authorities, before starting the activities directly with beneficiaries. 5. Decentralization of Project Implementation: As small number governmental agencies as possible should be involved in the project implementation process and it is preferable that they all will be based on the area of the project implementation. From the efficient management perspectives, it is appropriate to decentralize the project implementation by using the efforts of regional and local governments. Moreover, separate departments should be established at local and/or regional levels to implement such projects. For the implementation of a such a dynamic project, like HPC project, uninterrupted and prompt communication is very important, which would be difficult to ensure in case of involvement of relevant ministry in day-to-day project implementation taking into account lack of electronic communication means at many government structures 24
and the time wasted on sending original documents through regular mailing service and lack of prompt response from the decision making body-the intergovernmental commission consisting of members working in different agencies (the Commission is not a permanent body, the members of the Commission have their regular jobs at their agencies and not being involved in day-to-day project activities. waste additional time to thoroughly get acquainted with each of applicant’s package) and the whole additional bureaucratic processes connected with institutions like Ministries. 6. Ensuring Efficient System of Decision Making: In market-based projects, like HPC project, it is very important making decisions, which quickly respond to the changes during the project implementation. In GOAM HPC program the response to any raised questions, which required quick solution required the approval of the Supreme Project body- intergovernmental commission, which was not responding adequately because of the reasons mentioned in the previous paragraph. It is necessary that in regards day-to-day project implementation issues provide project implementation body decision making opportunity. Only the important programmatic decisions should be coordinated with funding organization. 7. Lack of Human Resources: Marzpetarans (Regional Government) working groups apart from the responsibilities assigned to them for the project were carrying out also their day-to-day job responsibilities as employees of the Marzpetarans’ relevant departments. Moreover, no additional payment had been foreseen although responsibilities had been increased. For next projects it should be ensured that the project implementers be full-time employees with adequate compensation. 8. Lack of Technical Resources: Different governmental agencies involved in project implementation have very poor technical resources (computers, copiers, fax and e-mail, and furniture, etc.): In order to efficiently implement HPC projects, the Government should provide the project implementers with electronic office equipment and conduct training for using the equipment. This will save a lot of time during the project implementation, will allow control more efficiently the project progress and prepare reports. Alternatively, the Government should contract out workers with relevant experience. 9. Close Work with Population: The experience of implementation of HPC projects indicates that it is predominantly social project. The success of the project depends on how residents have understood correctly the principles of the project. Public meetings and beneficiary orientation by the project implementers are of importance. 10. The Importance of NGO participation: NGO participation in the project also is very important. They ensure two-way communication between the implementers and population, assist in home search process.
25
11. Measures to be undertaken with regard to the price increase: The project implementation indicated that despite housing market research of and fixing certificate price during the project implementation the price increase is inevitable. Under these circumstances, while planning the project the Government should arrange with the dedicated banks and/or credit organizations aimed at providing privileged mortgage loans to the project beneficiaries or should foresee additional funds in the budget to for price adjustment. 12. Verifying Sales Agreement before Notary Certification: It not expedient to verify sales agreement and provide positive conclusion, moreover change it after notary certification. The sales documentation package should be verified and positive/negative conclusion should be provided before the notary certification of sales agreement, otherwise serious drawbacks can be identified, which can be corrected only based on the court decision, which is time consuming procedure. 13. Special Sales Agreement: Since HPC project has its specificities, instead of standard sales agreement, specially developed sales agreement should be concluded, which will reflect the project specificities. 14. Making payments based on the Certificate of ownership: The paces for paying the certificate price should be not sales agreement, but the Certificate of ownership. Transfer of ownership rights from the seller to the buyer occurs after the registration of the sales agreements in the local cadastral office only, based on which the buyer-the Certificate holder, is provided with the Certificate of ownership, copy of which should be attached to the sales package and serve as basis for all cash flows. 15. Reviewing beneficiary selection and sales packages: It is necessary to ensure that the beneficiary selection and sales transaction packages are reviewed by independent expert organization. This will allow to avoid drawbacks and discrepancies. 16. Defining clear deadlines for different phases of the project: During the project implementation, clear deadlines should be set for different steps of the project and inform beneficiaries about that. This particularly refers to the payment phase. 17 Participation of Banks: Comparing with the large-scale HPC projects, where banks participation is well justified, in smaller projects like GOAM HPC project, the process of sales transaction can be managed by the program management body. 18. Transfer of subsidy funds with one installment: In GOAM project the participation of banks has not been foreseen (as main responsible agencies for checking documents and preparing transaction package, conducting physical inspection of newly obtained apartment and legal expertise of documents, as well as a guarantor of factual transferring to the certificate holder an apartment or individual house, which is free from the rights of third parties), which considerably 26
makes it difficult to the issue of transferring the amount of the apartment price in 2 installments. During the project implementation, number of real difficulties connected with the turnover of dept free apartment to the buyer arises, so it is recommended that in such kind of projects the transfer of funds is conditioned based on the actual turnover of the apartment to the buyer and make payment in one installment-100%:
27
28