Banks’ real estate loan limit raised

Banks can now extend more real property loans to borrowers after the Bangko Sentral ng Pilipinas (BSP) eased their exposure limit to the sector.

In a message on Thursday, BSP Governor Benjamin Diokno announced that the central bank’s policymaking Monetary Board had increased the real estate loan limit of universal and commercial banks from 20 percent to 25 percent.

“The increase translates to additional liquidity for real estate lending amounting to around P1.2 trillion, based on end-March 2020 numbers,” he said without elaborating further.

Latest data showed that Philippine banks’ exposure to the sector rose by 14.07 percent year-on-year as of end-2019, with loans accounting for the bulk.

Real estate exposure of banks and trust departments reached P2.48 trillion in 2019, expanding by P306.82 billion from P2.17 trillion a year earlier.

Accounting for the bulk of the total, real estate loans made up 74.82 percent of banks’ exposure while securities investments accounted for the remaining 12.83 percent.

The loan component of the total exposure grew by 16.44 percent to P2.16 trillion from P1.86 trillion a year earlier.

Commercial real estate loans accounted for 64.73 percent of all loans while borrowers acquiring residential properties took the remaining 35.26 percent.

As of last year, the ratio of overall nonperforming real estate loans to total real estate loans remains below 2 percent.

The Bangko Sentral earlier assured the public that the property market was safe from an asset bubble for now, as prices remained broadly in line with market fundamentals.

“While there is persistent demand for residential properties, it would not indicate an asset bubble,” Diokno said then.

Citing data as of the first quarter, the central bank chief said property prices were still driven by Philippine offshore gaming operators (POGOs), traditional companies and business process outsourcing (BPO) firms’ demand for office spaces.

Domestic and foreign workers connected with BPOs, including POGOs, fueled demand in the residential segment.

According to Diokno, the increased demand for condominium units fundamentally reflects the existing sizeable housing backlog in the country, and the desire of many Filipinos working or studying in city centers to live near their workplace or school because of worsening traffic.

Source: TheManila Times