Location, dykes, designs key to loan approval
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Lenders cite lesson from disaster
The massive flooding has taught the mortgage industry to give more careful consideration to projects located in flood-prone areas during the pre-finance and post-finance stages.
Some banks now require developers to invest in flood-protection measures before approving loans.
Chatchai Payuhanaveechai, executive vice president of Kasikornbank, said that although serious flooding is rare in Thailand, developers now have experienced how badly their business can be hurt. They also have to adopt flood-protection designs, otherwise they might have difficulty obtaining financing.
Lending conditions for pre-finance in case the projects are in flood zones should be tighter than before, he said.
To prevent flood damage, developers that want to secure construction loans must raise the level of the front of the project 1 metre higher than the main road and build houses 30-50 centimetres above roads inside the estate. That means the level of the housing project should be 1-1.5 metres higher than the main road.
The bank has also suggested to developers of condominium projects that they do not put the car parks in the basement.
Home prices will go up by at least 10 per cent because developers have to recoup their huge outlays for flood protection, Chatchai said.
Thakorn Piyapan, executive vice president of Bank of Ayudhya (BAY), said housing projects in flood zones would be a “watch risk” for the bank.
If a mortgage applicant intends to buy a place in a flood zone, the bank will ask two questions before considering debt-servicing ability.
First, is the price low enough to attract interest in buying in a flood zone?
And second, can developers restore the confidence of home-buyers by providing flood-protection measures to their projects?
“We prefer giving home loans to customers if they say they chose the project because they are confident in the flood protection of the developers,” he said.
BAY does not focus on pre-finance loans much, but if developers want project financing from the bank, the location is the first consideration. Rangsit and Bang Bua Thong are the risk-watch locations for the bank, Thakorn said.
Pikun Srimahun, executive vice president of Siam Commercial Bank, said the best approach was to build the highest dyke possible around projects.
Tinnakorn Boonyakalin, senior vice president of Krungthai Bank, said that if developers changed their mindset to defending against floods, banks would have more confidence in extending project financing.
Several bankers noted that home-buyers would face higher prices for housing projects and condominiums, since developers will incur higher costs for installing the flood barriers.
Luckily, the lower interest rates can help ease the financial burden on home-buyers.
Safe, risk zones
Golden zones for developers and home-buyers in 2012
_ Bang Na-Trat
_ Bearing
_ Rama IX
_ Srinakarin
_ Lumpini-Rama IV
Risk zones
_ Bang Yai
_ Bang Bua Thong
_ Rangsit
Source: Kasikornbank
