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Real estate sector applauds lifting of 15pc loan cap

Real estate sector applauds lifting of 15pc loan cap


Property developers hope for fresh capital injection, but banks may not be willing to extend credit to sector so battered by economic slowdown


A view of a construction site from the Canadia Bank tower in Phnom Penh. Developers hope that relaxed lending rules will bring much-needed cash into the ailing industry.

RECOVERY may be  on the horizon for the  cash-starved real estate market with the lifting of the 15 percent loan cap, say brokers.  

The restriction was introduced in September  in part to rein in what was then a soaring property market. But the global economic crisis  drove prices down more than 50 percent, leading the government to ease monetary rules last Friday.

The new rule is set to take effect February 1.

Real estate brokers and developers applauded the move, saying it could bring much-needed capital and spell the beginnings of a turnaround.

"We are happy to hear the 15 percent ceiling has been repealed," said Chhean Dara, project manager of the US$50 million Young's Commercials and Resorts.

"Since the restriction was imposed, our development has progressed slowly and there have been few customers making purchases. We hope real estate will go back to normal."

Sung Bonna, president and CEO of Bonna Realty Group, said Monday the announcement is good news for the sector.

"It will stimulate developers and speculators and improve confidence soon," he said.

We are hoping for a modest recovery ... we do not expect a sharp rise in prices.

He said that the global financial crisis and the 15 percent  rule have been death blows to the industry. "There is no confidence in the sector. Real estate transactions have dropped to just one or two percent of what they were," he said.

"For the time being, we are hoping for a modest recovery of activity," he said.

"We do not expect a sharp rise in prices like before the crisis and the restriction," he added.

He also applauded the decision to cut the reserve rate from 16 percent to 12 percent, saying the liberalised rule could boost liquidity.

A wait-and-see approach

But even with the scrapping of the 15 percent rule, banks say they are not keen to lend to the battered property market.

Pung Kheav Se, president of Canadia Bank, told the Post Monday that the development is good for the property sector, but that his bank is not looking to extend credit to real estate.

"Repealing the 15 percent loans cap means some real estate developers that were running out of cash can borrow money and resume their activities," he said.

He said that Canadia Bank allocated 15 percent or $60 million of its portfolio to the real estate sector in 2008.

"For this year, the bank has set aside $70 million for the [real estate] sector. That does not mean that we will necessarily lend the money. But deposits in our bank have increased, so we have been able to increase loans."

"Our loans for 2009 are targeted mainly at agriculture and small- and medium-sized  enterprises," he said.

In Channy, president and CEO of ACLEDA Bank, said that a dependence on local deposits makes local banks unwilling to extend loans to long-term real estate projects.

"Bankers are using local capital like deposits. Normally, deposits are for the short term - just one year - while loans for houses are as long as 10 years.

When we do not have foreign capital sources, we cannot offer loans to real estate because it will cause an imbalance between assets and liabilities," he said.

"If the banks can find long-term capital sources from overseas, they will lend to the sector," he said.

"Even with the repeal of the ceiling on loans, banks will be wary of lending to the sector."

He said that the ACLEDA Bank lent a total of $643 million in 2008 with only 12 percent, or $55.5 million, going to real estate.

"For this year, the bank plans $700 million - it is still the maximum 12 percent of the amount that goes to real estate."

Chan Sophal, president of the Cambodia Economic Association, said Monday the new rules were a welcome boost to the sector and the economy in general.

"I believe the real estate sector will be recovered soon after the revoking of the loan restriction, but the growth will not be as fast as that in the past," he said. 


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