Two friends applied for a subsidized housing loan simultaneously, preparing the necessary documents together. However, while one received the loan in less than a month, the other has been waiting for nearly ten months since submitting his application. A bank employee explained, “According to the loan review period, citizens’ applications are processed in order. They have not reviewed your materials and have not discussed them at the loan committee meeting. On average, it takes six to 12 months to process an application, and in busy periods, it can take up to 24 months.” Frustrated by the delay, the young man, who hopes to secure a home before the arrival of a new family member and the end of his lease, simply shook his head, saying, “This is impossible”. Meanwhile, his friend has already moved into his apartment and settled in. He even offered his friend a chance to get a house through a short-term mortgage. However, the young man said he did not even consider accepting the offer, as he had his own plans and a clear intention to work and live in Ulaanbaatar. Left with limited options, he remains dependent on the bank’s overwhelmed waiting list, which holds thousands of pending applications.
The striking difference in the mortgage loan approval timelines between two friends underscores a growing divide in housing access policy across Mongolia, driven primarily by geographic location. One of the friends, a resident of Ulaanbaatar, has been waiting nearly a year for a subsidized housing loan without any substantial progress. Meanwhile, his friend, who resides in Darkhan-Uul Province, had his mortgage approved and processed within a matter of weeks. Despite submitting their applications around the same time and preparing similar documentation, the outcomes were vastly different.
The core reason behind this discrepancy lies in a policy shift that the government has begun to implement in earnest: offering preferential mortgage loan conditions that differ between urban and rural residents. Under this framework, citizens in provinces outside the capital, such as Darkhan-Uul, Orkhon and Selenge, are prioritized for mortgage financing, granted faster processing, and eligible for lower interest rates and reduced down payment requirements. In contrast, residents of Ulaanbaatar face longer waiting periods, stricter terms, and limited quotas due to rising demand and redirected funding.
This policy, though not new in concept, is now actively reshaping the apartment landscape. As part of a larger national strategy to decentralize Ulaanbaatar and stimulate development in rural areas, the government has embedded more detailed regulations into official mortgage loan agreements. These provisions seek to encourage migration away from the overcrowded capital, which continues to struggle with pollution, infrastructure strain, and housing shortages. 
The young man from Darkhan-Uul not only benefited from a more favorable loan environment but also tried to convince his friend to relocate. He painted a picture of a quieter, healthier life outside the capital, free from smog, noise and congestion. While the idea was tempting, his friend chose to stay in Ulaanbaatar, committed to his work, family plans and urban lifestyle. Unfortunately, this decision came with trade-offs: continued uncertainty, delays, and the real possibility of losing out on affordable homeownership. Their experience reflects a broader social dilemma now facing many young Mongolians. As government incentives for rural migration strengthen, more families will be confronted with a difficult choice: move to a province to access faster, cheaper housing, or remain in the capital and wait indefinitely under more competitive and constrained conditions.
Government Resolution No. 483 of 2023, titled “On Some Measures to Provide Apartments for Citizens”, alongside the Mongolian Regional Development Concept, introduced a preferential mortgage loan program aimed at promoting regional settlement and reducing congestion in Ulaanbaatar. Beginning two years ago, the policy began offering staggered interest rates to local residents. Specifically, it opened the door for citizens who move to rural areas, work in the civil service, and are purchasing their first home to access mortgage loans with a three percent interest rate. The remaining three percent of the standard six percent loan is subsidized by the state. Moreover, the usual 30 percent down payment requirement has been reduced to 12 percent. This means that a citizen who would have previously needed to pay 45 million MNT upfront now only pays 18 million MNT. This regulation remains in effect today.
However, the outcome of this policy, originally aimed at supporting rural communities, has significantly reduced the opportunity for urban residents to access mortgage loans. From 2013, when the concessional mortgage loan program was first implemented, until 2023, 20 to 25 percent of total mortgage financing was allocated to local governments, with the majority going to citizens in the capital. In contrast, over the past three years, a new policy has required at least 40 percent of the mortgage loan quota to go to local areas, reversing the distribution balance. This year alone, the central bank, commercial banks, and the Guarantee Fund have set aside over 600 billion MNT, roughly 45 percent of total financing, to be distributed to local governments. As a result, mortgage loan issuance in Ulaanbaatar has slowed considerably, leading to delays in application reviews and approvals. This shift has fueled public sentiment that “mortgage loan issuance has been delayed due to financing”, highlighting the growing disparity. While rural residents can now more easily access mortgages, capital residents face longer wait times, often stretching months or even years. To further this agenda, Mongol Bank is drafting revised regulations for commercial banks, mandating that at least 50 percent of mortgage financing be directed to rural areas, with plans to increase this share gradually. In addition, a new tiered interest rate system is expected to be introduced for Ulaanbaatar residents, distinguishing between those living in the city center and those in suburban districts.
Last spring, Governor of Mongol Bank B.Lkhagvasuren announced that mortgage interest rates would range from six to 14 percent, depending on the location and type of apartments. Around the same time, Minister of Urban Development, Construction and Housing J.Batsuuri stated that mortgage loans would primarily be directed toward the outskirts of the capital, particularly to projects such as the New Centennial City, now rebranded as Hunnu. These positions have since been formalized in the new regulatory framework. As part of the broader policy to develop ger areas and decentralize Ulaanbaatar, 50 percent of mortgage loans issued in the capital are now planned to be allocated to redevelopment zones, new settlements and satellite towns. In effect, loan access will be limited in the densely populated, central districts of the city, with priority given to suburban areas and ger areas.
This shift means that more than half of the total national mortgage financing will now be directed to rural regions, while the remaining portion will go to what are termed “urban rural areas”, or the outskirts and peripheral zones of the capital. As a result, opportunities for purchasing homes with mortgage loans in Ulaanbaatar’s central districts are becoming increasingly scarce. When asked which specific districts, redevelopment areas, and satellite towns will be prioritized under the new policy, the Ministry of Urban Development, Construction and Housing responded, “We do not know how our suggestions and recommendations were finally reflected in the mortgage loan regulations and contracts. Mongol Bank knows this.” The central bank, in turn, stated, “We will provide the public with objective and comprehensive information about this when we are ready to comply with the new regulations.”
The Ministry of Family, Labor and Social Security and the Ministry of Urban Development, Construction and Housing submitted a proposal to the central bank to introduce a four-tiered interest rate structure for mortgage loans, based on apartment size. According to an expert from the Housing Department’s Sector Development, Housing Policy and Regulation Division, the recommendation suggests setting the mortgage interest rate at six percent for apartments up to 60 square meters, and eight percent for those between 61 and 80 square meters, with corresponding amendments to existing regulations. Contrary to public speculation, loans will not be restricted solely to apartments of 50 to 60 square meters. Instead, these units would simply qualify for the lowest, or base, interest rate. The proposal also includes an interest rate of 10 percent for apartments up to 100 square meters, and 14 percent for those exceeding that size.
Although the need to differentiate subsidized mortgage loans based on citizens’ income levels and housing needs has been discussed for years, it has yet to be realized. This reform aims to change that. Data shows that access to mortgage loans remains disproportionately limited for low- and middle-income citizens. Of the 110,000 borrowers who have received preferential loans to date, only 40 percent are from middle- or low-income groups; the majority are high-income earners. “We are pursuing a policy to create more favorable and accessible conditions for middle-income and below-average income citizens, particularly first-time homebuyers living in suburban and rural areas,” the expert noted, emphasizing a shift in policy direction toward greater equity and inclusivity. 
To further strengthen the government’s efforts toward equitable housing access and regional development, the mortgage loan reforms are being integrated with newly introduced social and economic support frameworks. Programs like “My First Home” are designed specifically for first-time homebuyers, with a focus on young families and newly employed citizens, particularly in rural and suburban areas. “My Rental Apartment” aims to support those who are not yet ready to buy but need stable and affordable housing, while “My Primary Apartment” focuses on making permanent, quality housing more accessible through long-term ownership support. The “My Choice Local Area” and “My Choice Civil Servant” programs target regional migration and public sector workforce stability by offering preferential mortgage terms for those relocating to or working in rural provinces and small towns. These programs align closely with the government’s strategic goal of easing population pressure in Ulaanbaatar by encouraging voluntary relocation to satellite cities and underpopulated regions.
Mortgage loans under these programs are subject to revised eligibility and approval criteria that prioritize citizens with no previous homeownership, consistent employment, and long-term plans to reside in the target region. Importantly, these changes promote sustainability, requiring that financed housing meet green standards, including energy efficiency, modern insulation, seismic safety and reduced utility consumption.
In addition to adjusting interest rates and apartment size eligibility, the revised mortgage regulations also include new terms for down payments, loan periods, and credit scoring criteria. Special considerations are now being explored for single parents, citizens with disabilities, and young couples - groups that have traditionally faced higher barriers to entering the housing market. Despite the growing anticipation around these changes, a lack of clarity around timelines continues to raise concern. Commercial banks are awaiting final regulatory approval and official guidelines from Mongol Bank before updating their lending procedures. Until then, implementation remains in a transitional phase, with limited public awareness and confusion over current versus future loan conditions.
Meanwhile, housing developers are beginning to respond to the new policies by planning construction projects in compliance with green and resilient building standards. Some provinces have reported a rise in inquiries from citizens considering relocation, spurred by the promise of easier loan access and more favorable living conditions. Experts say that the success of this ambitious housing reform will hinge not only on its design but on its execution, particularly the fair allocation of funding, transparent communication of rules, and consistent coordination between ministries, banks, and local governments. If these elements are managed well, the reform could significantly reshape Mongolia’s housing landscape and offer new hope to tens of thousands of aspiring homeowners.

Published Date:2025-06-11