Developer Backed Mortgages

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Developer Backed Mortgages

Post by offroadscholar »

The first article from today mentions developer backed mortgages, which had me searching for a bit more info about them.
Second article is from July 2019

Looks to me like these types of loans are quite vulnerable to any downturn in the economy ?

I wonder what percentage of total housing loans in Cambodia are Developer backed vs loans from a Bank ?
According to Credit Bureau Cambodia (CBC), outstanding mortgages hit $3.42 billion at the end of June, an increase of 30 percent from the same time last year. This sum, however, does not include developer-backed mortgages that are widespread in the Kingdom.
ADB isn’t the only body that has expressed concern. The National Bank of Cambodia (NBC) and the World Bank in Cambodia have noted the risks of credit surging beyond real demand.
The NBC issued a statement earlier this year stating that credit growth in the construction and real estate sectors was still high at around 31 percent. ... ty-sector/
The increasing trend of mortgage lending by Cambodian real estate developers has drawn the attention of officials from Cambodia’s central bank. Leaders there have recently urged buyers to stay vigilant and carefully consider interest rates before they sign agreements.

Speaking during the National Bank of Cambodia’s (NBC) semi-annual results presentation on Saturday, Chea Serey, the director general, said the Cambodia real estate sector has seen a huge jump in demand for mortgages. She specifically said that more young couples are pursuing homeownership.

Serey urged property buyers to do their own research before putting down deposits. Taking a mortgage straight from a developer, she said, usually comes with a higher interest rate than one from a bank.

Without naming any specific companies, Serey added that, in some cases, real estate developers are attracting customers to in-house mortgages by waiving downpayments or other stipulations.

“Some project developers don’t want to facilitate bank mortgages because they want [buyers] to borrow from them,” she said, adding that there were cases of developers purposefully delaying bank mortgages or being uncooperative with buyers who borrow from banks.

“[Some developers] just want the buyers to feed them by using loan with high interest rate at 18 percent per annum.”

Since real estate developers are under the jurisdiction of the Ministry of Economy and Finance in Cambodia, the NBC has never included developer-issued mortgages in its official lending data.

The popularity of developer-issued mortgages has exploded in the Kingdom over the last few years. Typically these are 30-year contracts and rarely require downpayments.

Though these mortgages initially appear attractive to buyers, interest rates often double or triple the sticker price of a home.

Meanwhile, Cambodia’s banks usually require downpayments of at least 30 percent, and involve lengthy checks on credit history and repayment ability. Interest rates for these mortgages, however, usually clocks in at around seven to 12 percent.

According to the latest data from Credit Bureau Cambodia (CBC), mortgage loans taken from lending institutions nationwide amounted to $3.2 billion at the end of March. This marks an increase of 34 percent from the same time last year.

“The performance of mortgage loans provided by financial institutions is pretty good in the Cambodia market,” CBC’s Chief Executive Officer Oeur Sothearoath told ... mortgages/
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