Property Developer-Owned Banks: Opportunity or Risk for the Real Estate Market?

• 23 November 2020
• Local News
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In recent years, some major property developers in Cambodia have started opening their own banks. Chip Mong Bank and Prince Bank are two main examples of banks owned by well-known large-scale developers. But what is their impact on the real estate market?

Real estate expert and CEO of Pointer Nguon Chhayleang explained that while developers opening their own banks is essential the market, they have the potential to cause large scale risk if underregulated.

The main benefit of such financial institutions is to ease and boost real estate transactions. In short, Cambodian people can buy their own homes much easier without having to deal with complicated third-party bank procedures.

“If we borrow from other banks, it is complicated. Some people are buying under-construction property. If they borrow from the third-party bank, it’s hard to get the loan. That’s why the developers open their own banks to cut all this red tape,” said Mr Nguon.

“For some people, if they are eligible to borrow from third-party banks, they cannot borrow from the project owner’s bank. As a result, the buying and selling transaction will increase,” he added.

However, this also comes with risk as the money is accumulated in one place. The developer-owned bank can provide loans too loosely to boost their sale, which can result in a large-scale risk if the developers’ business experiences any challenges.

“The money goes from the left pocket to the right pocket of one person. Definitely, it is a risk because if that person got into trouble, the whole system will be in trouble too,” said Mr Chhayleang.

This is why in other countries like Thailand, developers and buyers prefer to request bank loans. This not only boosts the economy but also creates balance in the financial system.

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