21 February 2017
BEIRUT: Demand for housing loans from low- and middle-income families has witnessed a significant increase following the election of Michel Aoun as president and the rapid formation of Cabinet. Another factor that contributed to the rise was the decision of the housing bank in Lebanon to cut interest rates on loans to 3 percent.
“Demand for housing loans increased by 10 to 12 times compared to last year and we have started seeing an improvement in activity in the real estate sector,” said Joseph Sassine, chairman of the housing bank.
Sassine said the Central Bank issued a circular allowing the housing bank to drop its interest rate from 5 percent to 3 percent starting Jan. 1, 2017, in a bid to revive demand for properties after four year stagnation.
“The Central Bank aims, by this move, to reactivate the real estate sector and other related business activities such as engineering offices and the employment of skilled labor force,” Sassine said.
The Lebanese government controls 20 percent of the bank and the remaining 80 percent belongs to commercial banks, insurance firms, private sector and individuals.
The bank is authorized to grant loans up to LL800 million to low and middle income families who are willing to buy, build a house or renovate a pre-owned house.
The Central Bank has launched several initiatives over the past three years to stimulate the sector.
“Most of the loans in demand range from LL300 million to LL400 million,” Sassine said.
He added that the housing bank covers 80 percent of the price of a property for Lebanese working and residing in Lebanon while it covers only 70 percent of the price for expatriates who work and live outside the country. “We do not give expatriates the same percentage because it is riskier since it is more difficult to track their financial record compared to Lebanese who live in Lebanon,” he said.
Sassine added that borrowers have a grace period of three to six months and they have up to 30 years to repay their loans depending on their age. “Employees can repay their loans until they reach the age of 64 while the deadline to settle loans for people who operate their own businesses is by the age of 70,” he explained.
Among the conditions for taking a loan from the housing bank, the borrower should have a minimum income of LL2,250,000 or three times the minimum salary. “Family members or couples can also cooperate in taking a loan from the housing bank but their total salary should amount to LL2,250,000 minimum,” he said.
Sassine said that the latest move by the housing bank prompted an increase in demand on loans not only by locals but also by Lebanese expatriates working outside Lebanon. However, he ruled out the possibility of witnessing an increase in the prices of residential projects following the increase in demand for loans. “We will not witness an increase in prices because supply is still way more than demand and there is a great competition among developers in the market to sell their units,” he added.
Sassine said he believed real estate developers who used to offer up to 15 percent discounts to prospective buyers may refrain from doing so once the demand for properties picks up.
The banker added that the demand for loans and houses will not likely impact the quality of units offered by developers either because of the great competition in the market. “Developers are, to the contrary, trying to offer additional services to clients such as access to gym and pools in their projects to increase their sales.”
© Copyright The Daily Star 2017.