BEIRUT: The state-owned Public Housing Institute got a badly needed shot in the arm when Finance Minister Ali Hasan Khalil Thursday released $6.6 million to cover part of its outstanding dues to commercial banks.
But this advance payment only covered 20 percent of the total dues in arrears owed to Lebanese commercial banks, which subsidize the loans granted by the Public Housing Institute to low- and middle-class families.
The head of the Public Housing Institute Rony Lahoud reiterated that the banks would continue to offer housing loans, denying the existence of a cash flow problem.
He added that the Finance Ministry intended to pay the remaining debt in arrears to the commercial banks gradually.
But a senior official at the Association of Banks in Lebanon told The Daily Star that the Public Housing Institute had failed to pay the dues to the commercial banks for all of 2013 and the first half of 2014, estimating the outstanding debt at around LL60 billion ($40 million).
“If the institute was not able to continue operating due to a lack of funds, then the state should allocate, according to article 719/98, an amount of money that covers the sources of funding, and the sources of funding are the commercial banks,” the official explained.
ABL recently sent a letter to 29 banks which signed a protocol agreement with the institute for 15 years, calling on them not to rush and send funds to the institute because it had failed to pay its dues to these banks on time.
A source at the Finance Ministry said the Public Housing Institute was not the only government institution which had not received regular allocations from the treasury.
“For the past nine years, successive governments have been spending money haphazardly and without sticking to the last official budget which was approved by the Cabinet in 2004. In theory, the Finance Ministry should not exceed the 2004 budget and now the Finance Ministry is trying to fix this situation and refrain from overspending,” the source told The Daily Star.
The Public Housing Institute was set up to help low- and middle-income families buy homes at low interest rates. The commercial banks offer subsidized interest rates so the institute can provide housing loans of not more than 3 percent to the clients seeking to buy homes.
Lahoud said that the banks were reluctant to release funds to the institute after they heard that the finance minister has no intention of making any advance payments until the 2014 draft budget is approved by the Cabinet and the Parliament.
He added that the institute, thanks to the subsidized interest rates, provides limited income families between $30,000 and $40,000 from the value of the loan, adding that he receives 6,500 applications each year and their loans represent around 50 percent of the total real estate loans in Lebanon.
An ABL official stressed that banks would continue funding the previous loans granted by the institute to the current clients.
“We are merely asking the state to allocate funds to the institute that are equal to the sources of funding, and these allocations are close to $40 million a year,” the official said.
Some news media have expressed fear that Lebanon could face a real estate bubble if the institute stops providing loans to low- and middle-class families.