One of the top lenders, Raiffeisen Bank Romania, announced it would forego financing local real estate projects this year and in 2009, unless market conditions improve, while Volksbank decided not to finance new projects of developers.
“We will finalize approved investments, but are not launching new projects next year either, if current market conditions do not improve. We could provide financing if demand increases, but we will be careful. When talking about large projects, the risks are also greater,” Raiffeisen Bank Romania’s First Vice President, Marinel Burduja, told Business Standard. Burduja is in charge of the lender’s corporate segment.
Raiffeisen Bank Romania is the third-largest lender locally in terms of assets. It has cancelled financing worth €600 million for real estate projects it had planned last summer, leaving the bank’s loan portfolio on this segment idle, at €400 million.
Volksbank Romania, the fourth-largest lender in terms of assets, has decided to stop focusing on real estate. “Projects that were already signed are ongoing, but new lending demands of real estate developers are not being financed for the time being, given that the market is unstable,” the lender’s Marketing Manager, Alin Merer, told Business Standard.
Financing granted by Volksbank Romania to developers amounts to €400 million.
Companies operating in sectors that are only able to reimburse funds in more than 10 years, or ones with activities in risky sectors, such as real estate, are finding it difficult to borrow money from financial institutions, given that lenders are choosing their clients much more carefully due to the crisis. Furthermore, financing sources were severely reduced due to low liquidities and higher lending costs.
Bankers admit that mother-banks have decreased long and medium-term financing lines for their subsidiaries. However, they are not facing problems as far as short-term financing is concerned. “To date, financing lines have been dropped as is the case for other banks with foreign capital. As long as this liquidity crisis continues, it is hard to believe these will resume. We can no longer speak about long and medium-term financing lines from mother-banks,” UniCredit Tiriac Bank President, Dan Pascariu, told Business Standard. However, he added that “this does not mean that lending has ceased. The main financing source in the system is deposits.”
The local real estate market was among the hardest hit by the financial turmoil, especially on the residential segment. Besides financing difficulties, clients are now reluctant to buy, as they expect prices to further decline.
‘We could provide financing if demand increases, but we will be careful. When talking about large projects, the risks are also greater Marinel Burduja First Vice President, Raiffeisen Bank Romania
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