Property sector hit by banks’ caution on mortgages
COMMERCIAL BANKS continue to be cautious in advancing housing loans as they have concerns about the repaying ability of customers, and this is reflected in the fact that loan rejection is up to 40 per cent in the first four months of this year, property experts said.
“We have to pre-approve our customers before signing contracts for sale of our residential projects when commercial banks are restricted in providing mortgages to the middle and lower-income segement who don’t meet the banks’ requirements,” Pruksa Real Estate Plc’s chief executive officer Piya Prayong told The Nation recently.
He said the company has expanded its customer target to the middle and upper-income segment to reduce the number of customers whose loan applications could be rejected by commercial banks. Until now, only six per cent of the company’s total customers had seen their mortgage applications being rejected.
Atip Bichanond, president of Housing Business Association, added that the mortgage loan rejection rate had increased from an average 23 per cent a year to 40 per cent this year, impacting the real estate business. Some of the property firms have had to change their business model from sale of units to rental and also sell their projects to other developers.
Not only has the real estate sector been affected by the reluctance of commercial banks on mortgages, small and medium enterprises (SMEs) also faced a hard time getting loans from the banks due to rising non-performing loans (NPLs) to the SME sector.
Thai Credit Guarantee Corporation (TCG) president Nitid Manoonporn told The Nation recently that its loan guarantee faced NPLs up to 12 per cent in the first four months of this year, up from the average 10 per cent in the last year, when most SMEs faced a hard time generating income for debt servicing.
However, TCG has tried to help them to restructure their debt and held their businesses tide over financial problems from high competition in the market, he said.
The Bank of Thailand reported recently that the level of bad debt in the banking sector had increased in the first quarter amid modest loan growth.
Banks’ non-performing loans (NPLs) at the end of March had risen to 2.94 per cent from 2.83 per cent in the previous quarter, said Daranee Saeju, the central bank’s senior director in charge of supervising the Financial Institutions Strategy Department.
The increase in bad debt has in large part been caused by deteriorating loan quality in regard to lending to both large companies and SMEs in some sectors, according to a report on banking |performance in the first quarter released by the central bank.
The deteriorating quality of housing loans was also attributed to rising NPLs, while previously slower economic growth had an impact on loan quality, the report said.
Moreover, the rate of loan growth among the country’s banks was just 2.8 per cent higher than in the corresponding period last year, with such a modest growth rate being in line with the early stage of economic recovery and the fact that household debt remained high, she said.
