Thai banks urged to loosen property lending restrictions

Banks in Thailand are being urged to loosen their home-loan approval conditions including income and employment requirements in order to help the property industry.

A number of organisations including the Thai Condominium Association and developers are warning that tightened screening of mortgage applicants for fear of non-performing loans is hurting the property market.

'Home loans are vital as people still need to buy homes for living. With the banks being too careful letting out loans, the economic cycle would be halted,' said Atip Bijanonda, president of the Thai Condominium Association.

He said tighter restrictions should be applied instead on credit cards as many homebuyers with credit-card debt were rejected by the banks. He also called for interest rates to be cut by at least 50 basis points this year to stimulate the property market.

Developers are concerned about next year. They fear that reduced purchasing power as people became more insecure about their financial status will result in a severe downturn.

However, Atip said he believes that the condominium market will weather the global property crisis as prices vary and the sector can support buyers at all income levels.

'Prices of condos next year should be stable due in part to lower construction costs. But there could be some price adjustment depending on the project locations,' he predicted.

Manop Bongsadadt, a lecturer at Chulalongkorn University's Faculty of Architecture, said the Bank of Thailand should loosen the non-performing loan reserve standard to ease the credit crunch.

He said banks should separate borrowers into three groups based on their credit quality as low, medium and high-risk.

Developers should help guarantee loans of customers with medium credit risk while borrowers with poor credit history or those with NPLs should be tenants instead of buyers, he added.