Loans to realty, construction up 16%

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Real estate mogul Sam Soknoeun said banking industry loans are a vital backbone in boosting the national economy and affording Cambodians the opportunity to buy their own homes. Hean Rangsey

The total outstanding loans extended to the real estate and construction sector by banking institutions in Cambodia amounted to nearly $7.69 billion as of the end of the first half of this year, the National Bank of Cambodia (NBC) said in its Semi-Annual Report 2020 released on July 8.

This is a 16.23 per cent climb from the more than $6.61 billion posted at the end of last year, the NBC said.

Overall outstanding loans in the banking industry reached $26.7 billion on June 30, of which the real estate and construction sector accounted for 28.8 per cent.

Loans in the sector accounted for 11.6 per cent ($3.097 billion) of personal mortgages, 9.2 per cent of construction ($2.456 billion) and eight per cent of real estate transactions ($2.136 billion).

Overall outstanding loans in the banking industry reached $24.5 billion on December 31, of which the real estate and construction sector accounted for 27 per cent.

Sectoral loan accounted for 10 per cent $2.450 billion) of personal mortgages, 10 per cent of construction ($2.450 billion) and seven per cent of real estate transactions ($1.715 billion).

NBC governor Chea Chanto cited a number of Covid-19 repercussions emerging in the Kingdom’s banking sector.

“The primary risks are a prolonged Covid-19 and a fall in people’s incomes and businesses which would constrain growth in deposits and credit, trigger a wave of debt restructuring, provoke cracks in the real estate and construction sector and decelerate foreign capital inflows into the Kingdom’s banking sector.

“Although Cambodia has taken effective measures to control the spread of Covid-19, the construction sector in Cambodia is also facing a decline due to in part foreign funding are from overseas.

“With all these challenges, Cambodia’s economy is expected grow negatively in 2020, at the lowest rate since 1995,” Chanto said.

Cambodia will be set to make a V-shaped economic recovery next year if the novel coronavirus can be contained by the end of the year, he said, noting that the growth rate would fall short of 2009 levels due to a slow recovery in the tourism, construction and real-estate sector in the short-term.

Soeng Phorn, senior vice-president and credit division head at Acleda Bank Plc, told The Post on Wednesday that his bank had seen a slight decline in mortgages in the first half of this year.

The bank, he said, focused on lending to the hardest-hit sectors, especially small and medium-sized enterprises (SMEs).

“At Acleda, the number of mortgage loans fell just less than one per cent in the first half from the end of last year, but I expect a second-half rebound,” Phorn said.

He said the outstanding value of his bank’s mortgage loans totalled $142 million as of June 30.

Sam Soknoeun, the president of both the Global Real Estate Association and KW Sam Sn Realty Co Ltd, said banking industry loans are a vital backbone in boosting the national economy and affording Cambodians the opportunity to buy their own homes as fewer now have the cash in hand needed to go through with the purchases.

“The rise in bank mortgages bodes well for the real estate sector in Cambodia to remain a favourable forward pace,” he said.

But as the number of bank mortgages rises, the trend towards buying homes from developers with instalment pay plans increases substantially, he warned.

In a more upbeat tone, Soknoeun said mortgage lending in the Kingdom’s banking industry will further accelerate down the line, as interest rates plunge even lower to catch up to other countries.