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$); More than 63% of real estate loans (end-2007) extended to individuals. Real estate loans (in % of tot al loans)*
2002
2003
2004
2005
2006
2007
9.1
13
9.8
14.2
24.6
36.1
*end-year ALBANIAN ASSOCIATION OF BANKS SHOQATA SHQIPTARE E BANKAVE ALBANIAN ASSOCIATION OF BANKS SHOQATA SHQIPTARE E BANKAVE
Source: Bank of Albania ELVIN MEKA 13-05-2008
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BANKS AND REAL ESTATE LOANS Issues and Prospects
General Outstanding Balance for Real Estate Loans to Businesses and Individuals in mio A LL J un.07
J ul.07
A ug.07
Sep.07
Oct.07
N ov.07
Dec.07
J an.08
Feb.08
in%
ALL Business Individuals
6,828.77 14,870.20
6,943.51 15,484.81
7,021.84 15,566.88
7,518.95 16,090.91
7,606.27 16,549.07
7,013.29 16,856.85
7,768.76 17,508.44
7,792.83 17,463.09
7,854.12 24,182.54
24.52% 75.48%
US$ 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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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