BOT governor calls for prudence amid glut in condo segment, riding NPLs
Commercial banks are taking a cautious approach on loan extension to real estate developers and retail customers following a signal of concerns from the Bank of Thailand (BOT).
Recently, BOT governor Veerathai Santiprabhob expressed unease over the property sector, advising financial institutions to exercise prudence in lending to sector.
The central bank’s concerns came after witnessing a continuous rise in the sector’s non-performing loans (NPLs), due partly to financial institutions’ high loan-to- value ratio (LTV), and the prolonged interest rate situation which could lead to moves for higher yield.
Deja Tulananda, executive chairman of Bangkok Bank, said the bank has been careful on loan extension, while slowing down its lending to property developers and retail customers due to signs of oversupply in the condominium segment, as evident in lower sales and more promotional packages.
“Many condominium developers have faced difficulties in selling their projects,” he said.
The bank is now paying more attention on the location of the development, particularly condominium projects situated along the routes of the elevated rapid transit system or BTS, when considering a loan request.
Other factors include the liquidity and investments of the loan applicant as to whether it meets the bank’s requirements.
Decha said the bank is mindful of its loan- to- value ratio (LTV) as required by the central bank.
“The rise in NPLs in the property sector did not occur on the side of developers and retail customers. We have instructed our staff to be cautious on the matter as demand for condominium units mainly came from speculators,” Decha said.
Alongkot Boonmasuk, senior vice president for Housing Loan Alliance and Promotion Management Department of Kasikornbank (KBank), said the central bank had sent a strong signal to commercial banks and the bank has been cautious in its lending to the sector.
The bank focuses on the capability of the borrower, income and debt as well as the loan limit under the LTV requirements, he said
KBank’s average approval rate of property loan requests stands at 60 per cent of all applications. Current demand is real demand from home-buyers as borrowers understand the anticipated interestrate uptrend would lead to higher expenses, he said.
“We believe the current loan requests come from genuine home-buyers, trying to lock in the low interest rate now, Alongkot said.
Speculators may face heavier burden and higher risks, he said, adding that KBank has approved most loan applications from buyers of residential units developed by reliable property companies.
The bank’s property loan approval rate has increased to 75 per cent of total requests from an average of 60 per cent.
This year, KBank will keep the level of its NPLs in the property sector at no more than 4 per cent. It has also set a target of Bt45 billion in new loans.