Maybank is open to financing property development projects

This article first appeared in The Edge Financial Daily, on August 17, 2017.
Maybank is open to financing property development projects
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KUALA LUMPUR: Despite the grouses of property developers having difficulties in getting financing for their development projects, Malayan Banking Bhd (Maybank) said it is open to financing property projects provided they are feasible.

Maybank business development director Irene Khoo Poh Chin said the group is lending to property developers as long as they meet the bank’s strict guidelines.

“We have a few rules of thumb. We mainly look at the project to be constructed, the conditions of the land, the ability of the developer and its sponsors, and of course the existing regulations,” she said during her presentation at the Strata Management Dialogue 2017 forum yesterday.

Although a developer may only intend to finance the acquisition of an empty piece of land for future development, Khoo said the bank still puts more emphasis on the potential development project itself.

“Since we are doing project financing, our repayment relies a lot on the sales proceeds, so we emphasise on the project itself. So borrowers must already have an idea of the future project before they approach the lender.

“If the project is not viable, we will not lend. The type, location, feasibility and profitability of the development are very important,” she said.

“The company can be run by someone very experienced and reputable in the market, but if we find that the project is not viable, we will decline [to lend],” she added.

The lender also takes into account the terrain of the land for the project, Khoo said, as banks usually avoid developments in hilly areas.

“We will check the status of the land. Most banks would avoid developments in hilly areas as it is not easy to develop and we often see timeline delays, which drive up costs,” she said.

In terms of track record, Khoo said that Maybank prefers developers that have at least one project under their belt. In the event that it is a new developer, the bank would instead look at the sponsors of the company.

Besides that, the bank also considers the status of the developers’ other ongoing projects to ensure the company has the capacity to run another project at the same time.

“The potential acquisition may be viable, but having too many projects [at one time] will [affect] the developer due to capacity issues such as capital, labour or other [matters],” she said.