NBC Urges Prudence in Real Estate Loans Amid Projected Market Slowdown

• 6 July 2023
• Property Focus
• 2544 Views

The NBC has issued a cautionary statement to banks and microfinance institutions, emphasizing the importance of exercising prudence in granting real estate loans. This advisory comes in light of the projected slowdown in the demand for real estate within the domestic market for the current year.

During a seminar held at the Center for Banking Study on June 6, 2023, HE Dr. Chea Serey, Deputy Governor of the NBC, highlighted the need for careful scrutiny and caution in real estate lending, considering potential external risk factors that may contribute to a slower demand in the sector.

The 2022 Financial Stability Report released by the NBC underscores the dominant role of the banking sector in the country’s financial system, accounting for 85% of total assets and playing an active role in supporting economic activities.

In 2022, the banking system witnessed a significant increase in assets and loans, with a growth rate of 12.6% and 16.3%, respectively, reaching 317 trillion riels (equivalent to 264% of GDP) and 219.7 trillion riels (equivalent to 183% of GDP).

The report also reveals the diversification of loans provided to various sectors of the economy, with notable contributions from retail (16.4% of total loans), mortgages (14.9%), wholesale (10.1%), construction (9.9%), and real estate (9.8%).

As the real estate sector faces anticipated challenges in the market, the NBC’s cautionary stance aims to ensure the stability and soundness of the financial system. By urging financial institutions to exercise caution and prudence in real estate lending, the central bank aims to mitigate potential risks and promote the sustainable development of the real estate market.

 

• Economy and Finance