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Many small developers faced with loan hurdles

By on Apr 24, 2012 in Property News

Small and medium-sized property firms are facing heavier restrictions than in the past when they seek loans from commercial banks for new condominium projects as the banks try to manage their risks from new developers entering the market.

Some companies have to show presales of between 50 and 60 per cent of total project value before they can get a loan.

Siamese Asset Co’s latest condo project is Siamese Ratchakru worth Bt1.5 billion, and it plans three more projects worth Bt5.7 billion this year. Managing director Kajohn Sae-Ang said the company applied for a construction loan from a commercial bank for 30-40 per cent of total project value, and the bank set a condition that the project had to show presales of at least 60 per cent of project value. Two years ago, presale conditions were 30-50 per cent of project value.

Still, in this case the tighter restrictions did not present a problem for Siamese Asset, as its projects are close to Bangkok’s central business districts and mass-transit system, so most of them see more than enough orders to satisfy the bank’s conditions.

“We also have a condition that customers make down payments of about 28 per cent of the unit’s value, enough to apply for a mortgage,” he said.

Chatchai Payuhanaveechai, executive vice president of Kasikornbank, said that before a bank provided a loan for a property firm, it had to investigate whether the developer has experience with residential projects. Then it studies the background of the applicant and the feasibility of the project. If the firm has long experience and a successful profile, the bank will not set high presale conditions. But if the project entails risk, it will tighten the loan conditions.

He added that presale conditions for condo-project loans ranged from 30 to 60 per cent depending on the project risk.

Returning to normal
Meanwhile, Chatchai said demand for homes had returned after a slowdown following last year’s flood crisis.

“Demand to buy homes returned to normal in March, especially for residences priced between Bt2 million and Bt2.5 million per unit in locations that did not face flooding last year,” he said.

However, even locations that were flooded have also seen renewed demand, as home-buyers purchase insurance covering damage from floods and other natural disasters, he said.

KBank provided mortgages worth Bt8 billion in the first quarter of this year, about 33 per cent lower than its target of Bt12 billion. However, the bank believes that as the market returns to normal, it will provide new mortgages totalling Bt50 billion this year, Chatchai said.

Pruksa Real Estate director and chief business officer Prasert Taedullayasatit also said demand had recovered by last month in both flood-prone and flood-free locations. Its total presales were Bt6.7 billion in the first quarter: Bt900 million in January, Bt2.5 billion in February, and Bt3.3 billion in March.

Source : The Nation 23 April 2012

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