Georgia's Mortgage-Backed Bond Market Estimated to Reach ₾3 Billion in Next 2-3 Years.
Nikoloz Gagua predicts the volume of mortgage-backed bonds in Georgia will reach ₾3 billion within the next 2-3 years, following the adoption of legislative framework by Parliament and regulatory rules by the National Bank.
Banks will now be able to issue bonds backed by their mortgage portfolios, although other financial institutions can also issue these bonds if they make mortgage loans. Gagua believes that non-financial corporate sectors and retail investors will find the instrument attractive, with the potential for pension funds to also become investors.
Gagua stated that the volume of mortgage-backed bonds is estimated to be around ₾2-3 billion in the next 2-3 years, which is many times higher than the current bond market. He added that this tool will also be important in providing a new financing tool for mortgages and that it will have a positive impact on improving mortgage loan conditions.
At the first stage, the National Bank will be the investor for bonds backed by banks' mortgage portfolios. However, Irakli Elashvili, managing partner of "Alpha Capital Advisors," expects the instrument to also be attractive to institutional and retail investors. He noted that mortgage-backed bonds will be a serious booster for the local capital market.
Elashvili emphasized the importance of smaller banks operating in this new product segment, as almost all banks have relatively small-scale mortgage portfolios. The activity of these banks in the mortgage-backed bonds market will be crucial, in addition to TBC Bank and Bank of Georgia, which have the largest mortgage portfolios in Georgia.
The legal framework enables banks operating in Georgia to create a new financial instrument, "mortgage-backed bonds," using their existing mortgage loan portfolios. Banks will be able to put a part of these loans into collateral from their mortgage credit and issue new bonds instead, providing an opportunity for Georgian banks to attract additional financial resources for their operations.