As bank loans continue to play a key role in helping Cambodians purchase their own homes, ACLEDA Bank has reported an increase of mortgage lending in the first six month of 2015.

For the first half of 2015, Cambodia’s largest commercial bank provided $152.6 million in mortgages, which compared to the same period last year of $118.6 million translates to a 29 per cent increase. Additionally, the number of customers serviced rose from 5,526, to 6,729 during the first six months of this year.

So Phonnary, executive vice president and group chief operations officer, attributed the growth to a higher urban population, continued property growth coupled with a demand for modern homes and the overall health of the economy.

“The growth of this type of loan is due to many factors such as a demographic shift and a higher standard of living,” as well as more purchasing opportunities, he said.

“ACLEDA Bank is planning to provide $170 million for customers in housing loans in 2015,” she said. ACLEDA’s mortgage loan consists of a 10-year payment plan with an interest rate of 11 and 12 per cent per year, she added.

Before providing the loan, the bank inspects their customer’s financial background, their collateral, annual income, and their ability to place a down payment of 30 per cent of the property value, she said.

VMC Real Estate Cambodia general manager Dith Channa said that the increase of mortgage lending is a positive sign as the banking sector matures. While it provides potential home owners with the ability to obtain capital, he said that the high interest rates and a 30 per cent down payment are necessary safeguards to protect the financial market.

“The housing loan provision has not become problematic yet, for the bank has clear, strong policies before they provide customers with the loan,” he said.

However, when comparing interest rates to other countries, Cambodia’s remains higher, he added.

According to In Sitha, vice president of World Trust Estate, the increase of lending is also attributed to customers growing awareness of how banking and finance operate.

“Most people understand the flow of capital. The local administration system manages property well by issuing hard titles for people, and the property market is one factor that allows banks to [confidently lend],” he said. He predicted that the banking sector will continue to play a more active role in the future. However, he was concerned that high interest rates and the 10-year payment plan which limits the ability for customers to obtain mortgages.

“For me, I want to request that banks should lower the interest rate and should make the reimbursement longer by 15 or 20 years because borrowers would be able to afford [owning a] home by paying back less over a longer period of time,” he said.