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Philippines imposes tighter rules on real estate loans

Oct 09, 2017 | 0 Comment(s)

Bangko Sentral ng Pilipinas (BSP) – the central bank of Philippines – has imposed tighter rules on property lending and the financing of real estate projects, amid concerns that the grow the of the sector is putting the country’s banking system at risk. 
Several banks in Philippines have tightened underwriting norms following the restrictions, a BSP survey showed. Banks are also scrutinizing loan applications more cautiously. 
Banks’ exposure to real estate increased 21% to P1.221 trillion (US$0.024 trillion) last year from P1.006 trillion (US$0.020 trillion) in 2013, according to latest central bank data.
In a statement, Fitch said the new guidelines have been released by the bank to enhance reportorial requirements and strengthen the oversight of the banking system’s real estate and project financing activities.
“Real estate loans, which account for just over 20% of total bank lending, have risen by 21% on average over the last four years. Meanwhile, project finance is likely to take off as the Duterte administration pushes ahead with its infrastructure investment drive,” Fitch said.
“Greater monitoring of these lending activities has been hampered by limitations in system-wide data, and the new initiatives could help to address this, especially if more information is made available publicly,” it said.
However, Fitch said that “prudential standards have not been tightened under the new measures and the regulator still faces the challenge of discerning unhealthy risk-taking from productive lending that supports economic growth.”
“Closer central bank scrutiny may make banks more cautious in lending to these sectors, but it does not amount to regulatory tightening to curb growth,” said Fitch. 

Market Analysis - Philippines
Time series for residential property
Prime 3BR condominium price, Makati Central Business District
Price/Rent Ratio: 16 yrs

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