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Banks position themselves for rise in home loans

Sep 21. 2011
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By Sucheera Pinijparakarn


Ties with developers a plus for major players

Banks plan aggressive moves with major developers in the provision of pre- and post-project financing, as they bid to cash in on the new tax incentive for first-time home-buyers.

Kasikornbank (KBank) believes the major banks will have an advantage over their small and medium-sized rivals in picking up this business, due to their long relationship with developers.

First senior vice president Chatchai Payuhanaveechai said the institution was one of two banks that a major developer had chosen to provide pre- and post-project financing. KBank is, therefore, confident that its relationship with property firms will enable it to approach their customers with a view to taking out a mortgage under the new scheme.

With up to 20 developers as partners, he said the bank's main strategy after the government's launch of the tax measure for first-time home-buyers was to quickly approach major property firms, especially listed companies.

At present, KBank provides 50 per cent of its loans to developers and 50 per cent to general customers. The customers of developers will benefit from an interest rate that is 25-75 basis points lower than that charged to general customers, he said.

He said the bank would join hands with developers to launch special campaigns, including zero interest for the first three or six months of a home loan.

KBank's outstanding mortgages at the end of the year are expected to reach Bt185 billion to Bt190 billion.

Chatchai said most banks would focus on post-project financing under the scheme due to the strong financial status of developers.

He said that as regards the terms and conditions of the government's first-home programme, targeted buyers would have a monthly salary of between Bt20,000 to Bt40,000, which would qualify them to purchase a home priced at no more than Bt2 million. People with a higher salary would likely already own a residence.

KBank will, therefore, aim to capture developers' clients who intend to buy a home in the range of Bt1 million to Bt2 million.

Major developers are currently focusing on the low-priced housing segment of the market. As a result, homes priced up to Bt2 million represent 30 per cent of their portfolios.

Chatchai added that the government's scheme would create new demand among home-buyers as it runs until the end of next year, a long enough period to enable mortgages to grow by 9 per cent in 2012 from this year's expected level of 8.5 per cent. Overall home loans in the year to date total Bt1.95 trillion.

Thaweelap Rittapirom, executive vice president of Bangkok Bank, said the bank would cooperate with leading property developers to offer special campaigns to their customers.

Krung Thai Bank is also emphasising linking up with developers to launch special campaigns for post-project financing for buyers, said senior vice president Tinnakorn Boonyakalin.

"Developers are the priority target of the bank, and we will focus on condominium and townhouse prices at Bt2 million," he said.

The bank expects Bt8 billion to Bt9 billion in new loans from post-project finance during the final quarter. If the target is achieved, its outstanding lending at year-end will be in the range of Bt195 billion to Bt200 billion, he added.

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