Friday, August 18, 2017

Sales of apartments booming thanks to instalment payments

Instalment housing under K30 million are experiencing strong sales within the real estate market, according to U Yan Aung, general manager of Asia Construction.

“Within the market, sales of instalment housing in the lower price range, ranging from around K10 million, are booming. The majority of the people are purchasing normal apartment units with an instalment system, rather than condominium units,” he said.

At present, sales of instalment housing units, worth over K20 million, are catapulting within the market, U Yan Aung added.

“When you are planning to sell housing units, the buyers usually observe for things such as, the quality of the apartment, occupancy permits, electricity metre, current market price, and whether it is sold with an instalment system.

“As of right now, people are not buying apartments to speculate the market, but to live in these places, so housing units cost between K20 million and K30 million are being sold more,” he continued, adding that most of the buyers desire to purchase instalment housing with a five-year instalment plan.

“Apartment buyers are interested in buying housing with a long-term instalment plan, but the bank’s interest rate of 13pc has to also be taken into consideration. As these units are average-cost housing, and not high-cost housing with prices over K100million, the duration of five year is sufficient to pay the instalment. When buying an apartment, a down payment of 30pc has to be paid, and the remaining will be paid off within a five year instalment, so it would be around K500,000 monthly.” He said.

Furthermore, the majority of the construction companies have decided to collaborate with private banks, so as to carry out more sales of housings utilising the instalment system, said U Yan Aung.

“In the past, buyers had to buy apartments with an instalment system by connecting with banks prior the purchase.

“Nowadays, property developers are already connected with banks and they are selling apartments with instalment systems directly to customers. Construction firms have to guarantee on behalf of the apartment buyers with the instalment system.

“By connecting with the instalment system in the sales of housing units, the banks also influence the market price level of the units. The businesses cannot sell units which are more expensive than the banks allow,” he explained.

When housing units are sold with instalment systems with the banks, 30 percent of the apartment’s price is needed as cash payment and the rest, i.e. 70pc, can be paid in instalment, said U Yan Aung.

U Yan Aung said that currently, local banks are selling housing apartments with a two to 10 years instalment system.

“Some banks are giving loans to buyers to purchase apartments with up to a 10-year instalment system. Up to 15-year instalment system is also offered to buyers in some housing apartments. Although the instalment period has grown in length in recent years, the issue is the interest rate: 13pc bank interest rate is still too much for many would-be customers,” he said.

An interest rate should be set for the buyers who want to buy apartments with a long-term instalment system and it should be between five and 10 percent, said director U Aung Min from Myat Min construction firm.

“In other countries, housing loan is usually no more than 10 percent for apartment purchases. The current loan rate set in our country, Myanmar, is 13pc and it is too high.

“According to the economic situation of Myanmar, housing loan which have to be paid when buying apartments should be between 5 and 10 percent,” he said.

Currently, the Central Bank has consulted with International Monetary Fund (IMF) about reducing the bank rate but it would consider cutting the local bank rate only after making proper assessment of the inflation rate, the Central Bank’s deputy governor U Set Aung told reporters at the Union of Myanmar Federation of Chambers of Commerce and Industry in last month.

In other countries, bank rates are set according to their domestic inflation rates, he said, and adding that, in Myanmar, the Central Bank sets a minimum interest rate at 8.5pc for deposits and 13pc for loans.

The government needs to enact laws relating to financial and long-term loans which will help banks to offer long-term loans for those who want to buy homes in instalment, but no such laws have been enacted, so far, according to many bankers.

Banks still face challenges for offering long-term loans for those who want to buy housing units under an instalment system and it is not easy to provide 30-year loans like other countries if the government can’t set any specific policies, said an official from KBZ Bank.

“Like other countries, we need the government’s policies to be clear and specific as well as financial support to provide 30-year loans by instalment,” the official added.

State-owned Construction and Housing Development Bank (CHDB) under the Ministry of Construction is providing eight-year loans in instalment with 13pc interest for affordable housing projects which cost around K10 million per unit. The bank is also planning to extend the term of loans to 15 years, said the bank’s managing director U Win Zaw.

Translation by Kyaw Soe Htet, Win Thaw Tar and Zar Zar Soe