Despite Qatar Central Bank’s (QCB) stringent lending norms, Qatar banks’ credit facility to the real estate sector witnessed a significant growth in 2016. The loans to real estate sector jumped 7.65 percent or QR9bn to reach QR130bn in 2016. The banks’ total credit to various sectors surged to QR839bn from QR748bn from a year ago, QCB data showed.
The credit facilities to the real estate sector include for purchasing land, property developments and residential and commercial buildings. According to the existing guidelines, the loan facility to the real estate sector should not exceed 65 percent of the total cost of the project. And the bank must make sure that the entire credit is being used to the project implementation.
Overall, Qatar banks’ total credit facilities surged to QR839bn from QR748bn a year ago. Loans to public sector rose to QR293bn from QR238bn. Credit to general trade sector jumped to QR64bn from QR59bn, while loans to services sector increased to QR71bn from QR65bn.
Meanwhile a leading developer yesterday said the real estate sector is currently under excessive pressure due to funding constraints. Interest rates are going up, banks are increasingly reducing their lending facilities and the collateral conditions have become tighter.
Real estate sector is one of the key drivers of the local economy. Liquidity crisis is forcing the developers from launching new ventures, developers complain.
The results of a ‘risk perception’ survey conducted by Qatar Central Bank (QCB) indicated that the risk perception of the banks in Qatar had increased in 2016 as more number of banks (above 50 percent) responded an increase in the overall risk across all risk factors. Banks perception of risk in 2017 moderated as around two third of the respondents opined that overall systemic risk and market risk will either remain the same or decrease. However, 50 percent of the banks believe that liquidity and credit crisis will increase in 2017.
Qatar Central bank’s real estate price index for saw an uptick in December 2016, after hitting the lowest levels of the year in October. Leading reale state advisor DTZ said the availability of credit to the real estate sector will remain tight in 2017 and speculative purchases will drop. There was a fall in real estate performance metrics during the first three quarters of 2016,, however thee have been signs of recovery in Q4 and January 2017.
