New projects slowed in January-June this year, logging 11.4 per cent, 34.3 per cent and 29.9 per cent declines in number, combined value and construction area, respectively. Hong Menea
The combined real estate and construction loan exposure of the Cambodian banking industry stood at 31 per cent of the sector’s $33.9 billion total loan book in end-June, at about $10.5 billion, according to the central bank.
Broken down by segment, mortgages, construction and real estate represented $4.44 billion (13.1 per cent), $3.22 billion (9.5 per cent) and $2.84 billion (8.4 per cent), the National Bank of Cambodia (NBC) said in its first-half report released last week.
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The NBC said that although the prolongation of the Covid-19 epidemic threatens national economic development, a series of government policies have supported a positive outlook.
Global Real Estate Association president Sam Soknoeun told The Post on July 28 that the remarkable extent of the banking industry’s real estate and construction exposure signals that the market remains hot even during the Covid-19 crisis, pointing out that banks conduct thorough analyses of applicants’ financial flows.
“Although the crises unfolding with the Covid-19 pandemic in Cambodia linger, I’ve observed that construction activities, housing purchases and investments are still going on as usual.
“Improvements in this sector will provide a cornerstone for Cambodia’s economic growth, especially once the Covid-19 situation eases,” he said.
At the same time, the primary request from real estate players for the banking industry is to reduce interest on loans, he said, pointing out that rates in the Kingdom are notoriously high compared to other countries.
“I urge the NBC to look into this possibility, or other novel approaches to bring down interest rates on construction and real estate loans.
“Low interest rates will create more opportunities for people to invest and develop capacity, as well as improve families’ living standards,” Soknoeun said, noting that real estate loans in the Kingdom typically have per annum interest rates in the six-to-12 per cent range.
The real estate veteran portended that growth momentum in the construction and real estate sector would accelerate in the second half, with the government’s vaccination campaign as the main driving force behind Cambodia’s economic recovery.
Advance Real Estate Co Ltd founder and CEO Po Eavkong underlined the banking sector’s significant role in real estate and construction, noting a steadily rising trend of Cambodians using of loans from financial institutions to buy homes.
A sizable portion of bank creditors are young, newly-married, and looking to start a new life, he said, remarking that some home buyers pay instalments directly to the developer, while other opt to take out bank loans.
Construction on public and private construction projects remained active in the first half of this year, reflected in a 16 per cent year-on-year surge in the import of construction materials and equipment, following an 18.6 per cent contraction from January-June 2019, according to the NBC.
But new projects slowed in January-June this year, logging 11.4 per cent, 34.3 per cent and 29.9 per cent declines in number, combined value and construction area, respectively, it said, noting a distinctly poorer performance in the tourism and trade fields.
