Task
During the period of intensive growth of the "bubble" in the real estate market, the Bank faced the problem of objectively assessing the value of collateral in order to manage its risks in a balanced manner when issuing loans for construction and mortgages. The way out was seen in conducting a study to assess the reasonable market value of residential and commercial real estate.
See Opportunities
A direct survey of participants in the real estate market could not provide sufficient, and most importantly objective data to assess the situation. Monitoring of the declared prices in the ads for the sale and purchase of real estate also did not correspond to the real prices at which transactions were carried out in practice. IGM was able to develop a special multifactorial model of market behavior and received an objective picture.
Solutions
IGM consultants have done a lot of preparatory work. Extensive consultations with market players, experts in the field of real estate and construction, as well as analysis of global trends and experience of the real estate market, made it possible to identify the key factors of influence that formed the basis for the forecast of market development. A separate study was carried out for each factor - from the cost of acquiring land for construction and connecting utilities, to the price and volume of secondary supply on the market. Both historical data were analyzed and operational data were collected through field research. Each factor was analyzed individually. The forecast of the market development for 5 years was made. Subsequently, all factors were reduced to a mathematical model, which made it possible to calculate the deviation corridor of the minimum and maximum real estate prices for individual categories. A correct market assessment was obtained and a reasonable market value was calculated.
Results
The conclusions of the IGM study formed the basis of the Bank's development strategy, in particular, on the assessment of collateral and the prospects for lending to projects in the field of mortgage and construction. At the time of the onset of the global real estate crisis in 2008, the results of the study were confirmed in practice, and the Bank avoided direct losses in the amount of more than USD 100 million and retained its reputation largely due to the timely adjusted risk management policy.