As Property Market Recovers, Banks Begin Lending Again
Both VTB and Sberbank are ready to start lending to developers this year, particularly those constructing residential housing, and VTB alone is planning to offer builders as much as $1.2 billion in 2010.
State-run VTB Group is planning to loan between 20 billion rubles and 35 billion rubles ($662 million to $1.16 billion) to developers this year and is already in talks on a $400 million deal, senior vice president Pavel Kosov said last week, Prime-Tass reported. Of VTB's total lending to developers, 60 percent to 70 percent will be for residential property.
In Moscow, "the residential property market is starting to recover," Kosov said, adding that since the fourth quarter of 2009, "gradually, neither well nor poorly, sales have begun." Over the past year, VTB's loan portfolio to developers has remained almost unchanged, with builders making up 10 percent to 14 percent of the bank's lending, he said.
As of Sept. 30, 2009, VTB had 383 billion rubles in construction-related loans, or 14 percent of its portfolio, according to the bank's financial reporting.
When contacted by Vedomosti, Sberbank declined to offer an official comment about its plans to lend to developers, but in January a Sberbank executive said the lender would focus on residential construction, particularly in the economy-class segment.
"Apartments in the center of Moscow were selling for $4,000 per square meter in the fall of 2009, and by the end of the year they had risen to $6,500," he said, adding that since construction had been slow during the crisis, rising demand would push prices that much higher.
The Sberbank executive also expressed doubts about how soon the commercial property market would recover. In June 2009, Sberbank's former director for construction lending, Alexei Chuvin, said the lender had given developers 600 billion rubles, or about 15 percent of the bank's corporate lending portfolio.
Dmitry Garkusha, chief executive of DB Development, said the lending climate had improved for builders. Banks are now ready to offer up to 70 percent of the total investment, up from 50 percent, and rates have fallen to between 13 percent and 15 percent.
The improvement is thanks to a better property market, Garkusha said. Housing, in particular, has become more liquid over the past few months and prices have risen. He also said state banks were willing to offer loans for up to five years, whereas private banks were still playing it safe and only offering two-year loans.
"For now, we're sticking to a more conservative lending policy," said Alexei Grenkov, director of UniCredit Bank's corporate clients department.
"Just like before the crisis, we're only considering projects related to commercial property. And we don't finance unfinished projects. Just like before the crisis, rates for developers are higher than for lenders from other sectors, and the lending periods are already nearing pre-crisis levels of seven to 15 years," he said.
While developers could expect to borrow at 9 percent before the crisis, they should feel lucky to be getting money at 15 percent now, a banker from a private lender said on condition of anonymity.
Irina Dzyuba, commercial director of MR Group, said it was impossible to get a loan in dollars at 10 percent to 14 percent, which banks say they are offering, if the project is from the ground up.
Banks are particularly tough in the regions, where lenders are either not lending to commercial property developers or they're demanding terms that no one would be willing to accept, said Valentin Vinogradov, chief executive of Midland Development. Banks have asked to be able to seize collateral out of court or for executives to guarantee loans personally, he said.
Since the spring of 2009, rates have fallen by 2 or 3 percentage points, but requirements for borrowers are just as tough, said Valentina Stanovova, first vice president of Capital Group.
Alexei Dobashin, chief executive of Krost, said the biggest problem had been surmounted: Banks were once again allowed to lend to developers. He said rates had fallen by 5 to 9 percentage points — to 15 percent to 16 percent in rubles — which "is also a lot."
A rate of 12.5 percent to 13 percent would be reasonable, he said.