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Central Bank to keep backing home loan plan

File - Buildings under construction in Beirut, Thursday, July 31, 2014. (The Daily Star/Mohammad Azakir)

BEIRUT: The Central Bank will continue supporting the housing loans program for low- and middle-class families with the help of Lebanese commercial banks, contracting companies said Thursday.

“Money for the housing loans is still available and the mechanism of borrowing are still the same and did not change,” Elie Souma, the head of the Building Construction Association, said after meeting with Central Bank Governor Riad Salameh.

Representatives of contracting and construction companies met Salameh following reports that commercial banks would stop funding the Public Housing Corporation due its failure to pay all its dues to lenders.

Banks say that the PHC owes them around $40 million for 2013 and first half of 2014.

According to the protocol signed between the PHC and the banks, the corporation should pay back the total amount of subsidized interest payments to the lenders each year.

Last week, Finance Minister Ali Hassan Khalil agreed to give an advanced payment of LL10 billion ($6.6 million) to the PHC to cover part of the arrears owed to the commercial banks. But bankers stressed that this amount only covers 20 percent of what is owed.

But PHC head Rony Lahoud insisted that housing loans would continue to be provided to low- and middle-class families, denying claims that the state-owned institution is running out of cash.

Last week, a delegation from the Association of Banks in Lebanon told Salameh that the PHC has not paid its obligations to Lebanese banks since 2012 as per the protocol signed between the PHC and the ABL. It expressed concerns about the rising deficit at the PHC.

It suggested securitizing the PHC’s customer loans and for banks to buy them through low-interest loans from the Central Bank or by freeing reserve requirements.

But Salameh declined the ABL’s suggestion, given that the Central Bank is not part of the protocol signed between the two entities.

He added that the Central Bank would not provide banks with additional liquidity other than what it offered through its stimulus package.

Salameh and the banks agreed that the latter would seek to change the terms of the protocol signed with the PHC, with clients paying back the loan and the interest rates directly to the bank under a new payment schedule. They also concluded that banks should be more cautious about extending additional loans under the protocol signed with the PHC until this issue is resolved.

Souma stressed that around 30 percent of the people who wish to buy homes are now reluctant to do so due to the delicate security situation in the country.

He warned that political and security instability would have a devastation effect on the real estate market.

 
A version of this article appeared in the print edition of The Daily Star on August 08, 2014, on page 5.

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Summary

The Central Bank will continue supporting the housing loans program for low- and middle-class families with the help of Lebanese commercial banks, contracting companies said Thursday.

It suggested securitizing the PHC's customer loans and for banks to buy them through low-interest loans from the Central Bank or by freeing reserve requirements.

Salameh and the banks agreed that the latter would seek to change the terms of the protocol signed with the PHC, with clients paying back the loan and the interest rates directly to the bank under a new payment schedule. They also concluded that banks should be more cautious about extending additional loans under the protocol signed with the PHC until this issue is resolved.


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