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Posted On: 22 February 2010 02:17 pm
Updated On: 12 November 2020 02:10 pm

Banks loosen purse strings for real estate

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The local banking industry continues to tread with caution in disbursing personal loans despite having been given billions of riyals in bailout initiatives by the government last year. But a welcome development has been that the banks have begun giving away loans to the real estate sector which has been facing huge challenges due to the recessionary pressures. One of the major objectives of the state financial backup provided to the local banking industry was to help prop up the real estate sector after prices fell between 30 and 40 percent since the global recession raised its head. Individuals may have to wait longer than expected for a similar trend to emerge in the consumer lending behaviour of local banks as many of them have burnt their fingers due to large defaults. This is evident from the large provisions some of the local banks made for doubtful and bad loans which led to a minor drop in their collective net profits in 2009 over the previous year. “The banks are not going to be as liberal in disbursing consumer loans as they were before the onset of the global recession, but, definitely, there is some room for improvement insofar as lending norms are concerned. Some rules can be removed while some can be bent,” said a banking industry source. Although the overall loan portfolio of the banking industry grew by an impressive 16.7 percent in the past one year (between January 2009 and January 2010), consumer lending dropped. Personal loans dispensed by the banks totalled QR55.8bn in January 2009 with the figure dropping to QR53.23bn in December last year. Interestingly, in a month from December 2009 to January 2010, accumulated lending to individuals fell further from QR53.23bn to QR53.01bn. Figures released by the banking regulators, Qatar Central Bank (QCB), though, suggest that the overall exposure of the banks to the private sector rose 8.71 percent in a year between January 2009 and January this year. But loans given away to the services sector fell very sharply in January this year as compared to December 2009. Statistics show that from QR31.17bn in December 2009, lending to this sector slid to QR24.66bn. Industries were another segment which suffered as loans given away to this sector fell from QR6.9bn in January 2009 to QR6.05bn in December 2009. The situation is, though, improving as of January 2010 loan figures put the lending at QR6.2bn.