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Logo of Phnom Penh Post newspaper Phnom Penh Post - Acleda wary of bubble as home loans expand

Acleda wary of bubble as home loans expand



Acleda started providing mortgages in January 2007. By March this year, the bank had 1,045 outstanding home loans worth about $40 million.

Acleda Bank entered the home lending market a little more than a year ago to find itself ringside in the middle of an extravagant real estate swap mart


But after the boom often comes a bust, and so as speculators grab up houses and plots of land hoping for triple digit gains in a year, the bank is working hard to evaluate the market. It hopes to avoid the type of over-lending and risky home loans that have wrecked lenders in other cities.


“We are concerned about three areas where there is a bubble,” says In Siphann, senior vice president and head of the credit division at Acleda.


Prices are going up 100 percent per year and we are concerned about that in the areas Phnom Penh, Siem Reap and Sihanoukville.


“These are the bubble areas. Before providing a loan there we will do a serious evaluation to avoid speculation and to avoid risks.”


Regardless, the business is streaking ahead. The bank began making home loans in January 2007.


“By mid 2007 it really started to grow,” says Siphann.


As of March 1 this year, Acleda’s home loan portfolio contained 1,045 outstanding home loans worth about $40 million.


“We’re seeing 100 percent growth in 2008,” says So Phonnary, senior vice president and head of the marketing division.


Historically, Cambodia never had mortgage lending. In the past, people wanting to buy a home would have saved up the money or borrowed from a relative.


Prices are going up 100 percent per year and we are concerned about that in the areas Phnom Penh, Siem Reap and Sihanoukville… These are the bubble areas.” 


Even back in the 1960s there were only a few banks in Cambodia and none offered home loans. Over the last 15 years, the number of banks has proliferated and consolidated. Only recently have banks really begun to offer diversified services.


But, even so, most bankers say they aren’t able to offer home loans because in the event of a bad loan, the foreclosure process would be unmanageable.


To get around this foreclosure risk, Acleda keeps the title to the property until the loan is paid off.


As it takes pains not to get caught in the ongoing land speculation craze, the bank does not make loans to buy land.


Siphann says the home loans Acleda offers in Phnom Penh are mostly for flats. But in the provinces if someone owns the land, they can get a loan to build a house. However, they must show proof of plans to build in the form of a building contract.


Only then will Acleda send a credit officer to get an appraisal.


In order to qualify for a loan, the borrower must demonstrate the ability to pay it back. A credit officer makes an assessment of monthly income and tailors the monthly payments to the borrower’s repayment ability, to a maximum loan length of ten years. The interest rate is fixed at 13 percent per year.


Although still small, the home loan market is expected to grow as rapidly as banks will allow it. In places like Phnom Penh, multi-generation families who live together in one house are beginning to spread out, with the younger generation seeking to move out on their own.


Other borrowers are people who came to Phnom Penh to work and no longer want to return to their home provinces, or middle income parents who want to try to buy a house for a son or a daughter.


ANZ is also offering home loans. The bank offers 15-year installment loans allowing customers to borrow up to 60 percent of the purchase price of their home at variable interest rates in the nine percent range.


The bank’s CEO, Dean Cleland, told the Post previously that lack of registered land titles hampers the home loan market but that the bank would lend against properly registered titles.



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