Small provincial property developers may struggle to get bank funding to finance residential projects as new, larger rivals blunt their competitiveness and erode their projects' viability.
A condo construction site in Cha-am, Phetchaburi. Bankers say small provincial developers face difficulty accessing funding amid a weak economy. THANARAK KHUNTON
Amid the lacklustre economy and intensified competition in the provincial market after the entry of large developers, it is not easy for property developers and small companies owned by local people to tap project financing, said Siam Commercial Bank first executive vice-president Vipon Vorasowharid.
Large developers can flex their muscles with a solid financial position, well-known brand and well-planned marketing.
"We would not grant loans to small provincial developers if their project's feasibility was low, even if their collateral value was sufficient to cover liabilities. Project feasibility and debt payment ability are more important than collateral," Mr Vipon said.
For example, a glut of serviced apartments exists in many provincial areas, he said.
Jirachayuth Amyongka, senior executive vice-president of CIMB Thai Bank (CIMBT), said the bank would review its loan extension stance by March after having slowed down lending project financing to developers for a while.
The deceleration in project financing is also in line with customers' demand. Developers have delayed starting projects because of the slow economy and swelling household debt's weakening of purchasing power.
Even if CIMBT returns to a normal rate of project financing, it will stick to stringent scrutiny processes, with SET-listed developers and provincial developers with healthy financial track records and long-term experience as its target.
CIMBT, which is 93.7% owned by Malaysia-based CIMB Group, expects its property loan ratio to be maintained at 10-15% of its SME loan portfolio.
TMB Bank chief SME officer Trirong Butragaht said the bank had no plans to significantly increase its property loans, though they represent a small portion of its outstanding SME loans of 180 billion baht.
The bank instead will concentrate on the manufacturing sector and supply chain businesses due to greater opportunities, he said, adding that TMB aimed for 2015 SME loan growth of 8%.