What is
cho
- CHO stands for Certificat Hypothécaire Obegi in French.
- It is a real estate guarantee certificate which you deposit in a bank on a short-term basis (1 to 12 months).
- It works just like depositing cash, but instead of receiving interest on your cash, you earn a fee on your CHO.
- This guarantee certificate will be used by the bank to borrow more efficiently through the interbank market while using its pool of CHOs as collateral, and therefore lend more easily.
CHO
Operational model
-
The system relies on:
- A new banking instrument: the CHO
- An integrated database: the Agency
- Significant wealth: the country’s real estate assets
The Agency
At the core of the system, the Agency is in direct contact with banks and real estate civil service administrations.
It is supervised by the regulatory authorities
Its tasks include:
- Valuating all eligible real estate assets according to the ‘Standard Valuation’ process
- Registering and releasing the guarantees
- Reporting transactions to all stakeholders
Real Estate Assets
Total value is equal to many times the GDP
Are eligible if properly registered and included by the relevant regulatory authorities in the framework of the CHO system
The
Benefits
The CHO instrument could have major positive implications for each of the parties involved, namely, the Real Estate Owners, The Economy, The State and the Banks.
For the economy
An acceleration of economic growth
A fostering of banking credit
Enhanced access to finance
Further regularization of the real estate sector
For the state
An increase in tax revenues
Additional income generated by public sector real estate assets
An improvement in the state’s borrowing capacity
For real estate owners
Better information on owned real estate assets
A steady progression in the value of owned real estate assets
Additional revenues
More banking products and services, including better access to credit
For the banking sector
A quasi-liquidity
A significant decrease in the costs of mortgage loans
Access to the Agency’s database (a source of commercial information)
A widening in the customer base and the range of products and services
The
Risks
Systemic Risk:
The systemic risk could occur in the case of a bankruptcy of the depositary bank. This might cause a ripple effect in the real estate market.
Asset Inflation
In the absence of regulation, there is a risk of real estate inflation.
Inflation
Inflation pressure might occur if the economy were to grow too fast, causing higher consumption and price increase.