banks and real estate loans

1 downloads 0 Views 378KB Size Report
ELVIN MEKA 13-05-2008. ALBANIAN ASSOCIATION OF BANKS. SHOQATA SHQIPTARE E BANKAVE. General. Outstanding Balance for Real Estate Loans to ...
BANKS AND REAL ESTATE LOANS Issues and Prospects

ALBANIAN ASSOCIATION OF BANKS SHOQATA SHQIPTARE E BANKAVE

Dr. Elvin MEKA Secretary General ALBANIAN ASSOCIATION OF BANKS International Conference on the Real Estate Development in Albania Tirana, 13-14 May 2008

BANKS AND REAL ESTATE LOANS Issues and Prospects

General †An ever-increasing type of loan; †Loans, the primary source of real estate funding; †The biggest loan item within the banking system’s balance sheet; †Only 24.3% of extended real estate loans in domestic currency (ALL); the rest in foreign currency (~70% in EUR, 5% in US$); †More than 63% of real estate loans (end-2007) extended to individuals. Real estate loans (in % of tot al loans)*

2002

2003

2004

2005

2006

2007

9.1

13

9.8

14.2

24.6

36.1

*end-year ALBANIAN ASSOCIATION OF BANKS SHOQATA SHQIPTARE E BANKAVE ALBANIAN ASSOCIATION OF BANKS SHOQATA SHQIPTARE E BANKAVE

Source: Bank of Albania ELVIN MEKA 13-05-2008

2

BANKS AND REAL ESTATE LOANS Issues and Prospects

General Outstanding Balance for Real Estate Loans to Businesses and Individuals in mio A LL J un.07

J ul.07

A ug.07

Sep.07

Oct.07

N ov.07

Dec.07

J an.08

Feb.08

in%

ALL Business Individuals

6,828.77 14,870.20

6,943.51 15,484.81

7,021.84 15,566.88

7,518.95 16,090.91

7,606.27 16,549.07

7,013.29 16,856.85

7,768.76 17,508.44

7,792.83 17,463.09

7,854.12 24,182.54

24.52% 75.48%

US$ Business Individuals

4,205.42 2,795.93

4,321.16 2,693.54

4,380.90 2,616.63

3,373.22 2,351.97

3,275.35 2,285.08

3,154.41 2,167.39

3,087.15 2,141.78

3,032.61 2,079.60

2,779.69 2,081.17

57.19% 42.81%

EURO Business Individuals

19,262.85 32,714.84

19,787.24 34,204.99

21,456.67 36,786.25

22,915.47 39,524.28

23,613.87 41,561.04

22,916.37 43,478.28

26,851.15 46,223.29

26,478.77 49,192.15

28,230.81 52,292.06

35.06% 64.94%

236.82 1.84

252.97 1.81

257.99 1.82

253.60 1.77

256.96 1.72

250.34 1.69

249.61 1.69

263.59 1.75

260.85 1.80

99.32% 0.68%

80,916.67 234,614.59

83,690.04 239,403.38

88,088.99 246,737.55

92,030.18 254,615.51

95,149.35 262,251.97

95,838.62 270,025.14

103,831.87 287,455.82

106,304.39 289,187.44

117,683.04 301,862.48

34.49%

34.96%

35.70%

36.14%

36.28%

35.49%

36.12%

36.76%

38.99%

OTHER CURRENCIES Business Individuals Subtotal Total loans in % of total

Source: B ank of Albania ALBANIAN ASSOCIATION OF BANKS SHOQATA SHQIPTARE E BANKAVE ALBANIAN ASSOCIATION OF BANKS SHOQATA SHQIPTARE E BANKAVE

31 Dec.2007: E UR = A LL 121.78 ELVIN MEKA 13-05-2008

3

BANKS AND REAL ESTATE LOANS Issues and Prospects

General † the volume of non-performing real estate loans, compared to the volume of outstanding non-performing loans in the banking system, is still considered to be low, † the quality of actual real estate loan portfolio remains good.

ALBANIAN ASSOCIATION OF BANKS SHOQATA SHQIPTARE E BANKAVE ALBANIAN ASSOCIATION OF BANKS SHOQATA SHQIPTARE E BANKAVE

ELVIN MEKA 13-05-2008

Source: Bank of Albania

4

BANKS AND REAL ESTATE LOANS Issues and Prospects

Main features PERIOD: † Minimum: 5 years † Average: 15 years; † Maximum: 25 years GRACE PERIOD: † Up to 12 months LOAN-TO-ASSET VALUE (financing limit): † From 60% to 100% of the market value of the collateral ALBANIAN ASSOCIATION OF BANKS SHOQATA SHQIPTARE E BANKAVE ALBANIAN ASSOCIATION OF BANKS SHOQATA SHQIPTARE E BANKAVE

ELVIN MEKA 13-05-2008

5

BANKS AND REAL ESTATE LOANS Issues and Prospects

Main features (2) ADMINISTRATIVE FEE: †1-2% (Min. EUR 150) INTEREST RATE: †Loans in domestic currency: „ Minimum: 12m T-Bills + 3% - 5% „ Maximum: 12m T-Bills + 7% - 9%

†FX Loans: „ Minimum: EURIBOR/LIBOR + 2.5% - 3.5% „ Maximum: EURIBOR/LIBOR + 7% ALBANIAN ASSOCIATION OF BANKS SHOQATA SHQIPTARE E BANKAVE ALBANIAN ASSOCIATION OF BANKS SHOQATA SHQIPTARE E BANKAVE

ELVIN MEKA 13-05-2008

6

BANKS AND REAL ESTATE LOANS Issues and Prospects

Main features (3)

TYPE OF COLLATERAL: †Physical collateral: „ „ „ „ „

The purchased house; The house of borrowers' relatives; Unfinished buildings (rarely); Shop on a residential building; Land.

†Other Guarantees: „ bank guarantee; „ cash collateral; „ Treasury Bills. ALBANIAN ASSOCIATION OF BANKS SHOQATA SHQIPTARE E BANKAVE ALBANIAN ASSOCIATION OF BANKS SHOQATA SHQIPTARE E BANKAVE

Source: Bank of Albania

ELVIN MEKA 13-05-2008

7

BANKS AND REAL ESTATE LOANS Issues and Prospects

Issues General economic and social issues: † Informal economy and employment; † Fragile sustainability of the economic development, not clear projections for the coming years; † High job circulation and turnover; † Urban infrastructure still under improvement.

ALBANIAN ASSOCIATION OF BANKS SHOQATA SHQIPTARE E BANKAVE ALBANIAN ASSOCIATION OF BANKS SHOQATA SHQIPTARE E BANKAVE

ELVIN MEKA 13-05-2008

8

BANKS AND REAL ESTATE LOANS Issues and Prospects

Issues (2) Legal issues: † Frequent changes and loopholes in the land-related legal framework and regulatory basis; † Uncertainties over ownership lack of clear ownership and countable cases of property’s overlap (expected to be resolved within 2009); † Property disputes, the most common cases in Albanian Courts; 40-50% of court cases involve property dispute; † Long-lasting and problematic process of restitution and compensation of the properties expropriated by the communist regime; ALBANIAN ASSOCIATION OF BANKS SHOQATA SHQIPTARE E BANKAVE ALBANIAN ASSOCIATION OF BANKS SHOQATA SHQIPTARE E BANKAVE

ELVIN MEKA 13-05-2008

9

BANKS AND REAL ESTATE LOANS Issues and Prospects

Issues (3) Property’s registration issues: † The property’s registration with the Real Estate Registry Office, still a bumpy ride; lack of a digital register; † Long-lasting and time-consuming procedures (mainly at Bailiff’s Office), for collateral enforcement, in case of defaulted loans and respective foreclosures; † Difficulties in having a temporary registration and a respective mortgage on this temporary registration; † Rare usage of under-construction-buildings as collateral; † Pre-signed (entrepreneurship) contracts not an eligible document for temporary mortgage. ALBANIAN ASSOCIATION OF BANKS SHOQATA SHQIPTARE E BANKAVE ALBANIAN ASSOCIATION OF BANKS SHOQATA SHQIPTARE E BANKAVE

ELVIN MEKA 13-05-2008

10

BANKS AND REAL ESTATE LOANS Issues and Prospects

Prospects & Recommendations † Speeding up the process of resolving land-related issues; † Setting up a digitalized data system at RERO, gathered from different state institution, such as Bailiff’s Office, courts, social insurance, tax office, RERO office, attorney general etc; † Banks’ access to the above digital register; † Shortening the time for collateral enforcement; † Extensive usage of under-construction-buildings as collateral; ALBANIAN ASSOCIATION OF BANKS SHOQATA SHQIPTARE E BANKAVE ALBANIAN ASSOCIATION OF BANKS SHOQATA SHQIPTARE E BANKAVE

ELVIN MEKA 13-05-2008

11

BANKS AND REAL ESTATE LOANS Issues and Prospects

Prospects & Recommendations (2) † Closer monitoring of the market, implementing regional and international experience; † Credit rating and risk assessment models to be based upon to Albanian market conditions; † More efforts to develop secondary market;

a

vibrant

real

estate

† More capacity building within RERO and Bailiff’s Offices; † Assessing the possibility to implement financial innovation in the real estate market, by linking it with capital markets. ALBANIAN ASSOCIATION OF BANKS SHOQATA SHQIPTARE E BANKAVE ALBANIAN ASSOCIATION OF BANKS SHOQATA SHQIPTARE E BANKAVE

ELVIN MEKA 13-05-2008

12

BANKS AND REAL ESTATE LOANS Issues and Prospects

Contacting AAB

URL: www.aab.al E-mail: [email protected] ALBANIAN ASSOCIATION OF BANKS SHOQATA SHQIPTARE E BANKAVE ALBANIAN ASSOCIATION OF BANKS SHOQATA SHQIPTARE E BANKAVE

ELVIN MEKA 13-05-2008

13

BANKS AND REAL ESTATE LOANS Issues and Prospects

THANK YOU! ALBANIAN ASSOCIATION OF BANKS SHOQATA SHQIPTARE E BANKAVE ALBANIAN ASSOCIATION OF BANKS SHOQATA SHQIPTARE E BANKAVE

ELVIN MEKA 13-05-2008

14