Three steps to banking homeowners in Russia (1)

Concordiste: Interview with Ksenia Kroshneva
September 2015

Concordiste: Despite the crisis about one million new apartments were build in Russia in 2014 with a floor of 67 million square meters. That space is comparable to the surface of Ireland. Such surface needs capital for maintenance and capital repairs, therefore banking services. Each client is precious. Holders of property are even more precious, bankers say looking at tangible collateral. Banks in Russia seem not to reach out to homeowners’ associations as Clients. What’s the challenge there?

Ksenia Kroshneva: Homeowners associations (HOAs) are a truly specific market segment – they are not small and medium enterprises, not retail, but something in between with its own features. Effective marketing to HOAs starts with a recognition that they are an association of individuals under certain legally binding rules. And indeed, it is an association of individuals that is obliged by law to set cash aside for future investment in capital repairs. With on average RUB 7 per square meter and per year, the Capital Repairs law obliges owners of apartments to save for future capital repairs. Only within a year, the owners of the residential surfaces built in 2014 should accumulate RUB 470 million (EUR 17 million). These new surfaces account for 2% of the total yearly savings under capital repairs law. The average residential building in Russia is 46 years old, which is not much more than in Europe, but there is a difference: For many years the quality of construction remained low and almost all soviet-period buildings require serious refurbishment. Considering the fact that residential property in Russia numbers around 20 million buildings this seem to be a tasty morsel for any bank.

Concordiste: If homeowners’ associations are unique animals with money savings prescribed by law, how to best approach them?

Ksenia Kroshneva: Banks need to start getting serious about market segmentation, because by really understanding the nature and the structure of HOAs they can effectively communicate with homeowners, and so be much more confident of being called upon for loans for refurbishment. This means for instance and according to possibilities that the there should be a separate team within the bank, which focuses on the development and sales of the product for HOAs. It could be something as a loan for energy saving measures in a house or the whole condominium.

Concordiste: What characterises a banker or a team of bankers that can sell a product to HOA Clients?

Ksenia Kroshneva: To make sure that the market segment is served effectively this team needs to be ready to answer the following questions: What are the loan conditions but also about service, template documents and requirements to the renovation project design to be submitted to the bank. If the bank requires an original memo from the homeowners to give a loan, HOA chairperson who never wrote memos of that type before, would appreciate a template, that helps to establish a decision and a document, that otherwise blocks the wish to start the renovation.

HOAs are often not seeking for a loan because they don’t realize they are able to obtain a loan. A step one recommendation to Russian banks would be carve out your target group, design and implement strategies to target them.



Ksenia Kroshneva, marketing strategist, has been working with retail banks in Russia. Currently, she leads the implementation of the marketing strategy for EBRD's Russian Residential Sustainable Energy Financing Facility. She graduated from the Russian State University for the Humanities.

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