News: Banks Insist that They are not to be Blamed for Shopping Mall Glut

Sep 12, 2017

 

In clarifying reports that banks are to blame for the glut in office and retail space supply within the Klang Valley, the Association of Banks in Malaysia (ABM) slammed claims that banks have been handing out loans without conducting due diligence.

The association noted that its member banks have stringent processes for credit risk assessment and sound lending and valuation practices in place.

Banks also perform credit analysis before granting any financing for commercial properties.

This include conducting project feasibility studies, marketability and competitors’ analysis, assessing economic and market developments as well as repayment capability.

In the event borrowers hire independent valuers/consultants to make a feasibility study as part of the its submission criterion for the loan, the report would still be subjected to the assessment of the bank, said ABM.

It explained that banks do not depend solely on feasibility/valuation reports submitted by borrowers since other factors such as the financial standing of the developer, track record and sources of funds are considered in assessing loan applications.

In evaluating loans to finance the construction of shopping malls, banks also consider the area’s purchasing power, population growth and size, potential growth in retail spending and the tourism industry’s outlook.

“For some of our member banks, the financing of commercial properties and shopping malls requires an elevated degree of risk assessment and higher approving level,” it said.

“ABM would like to reiterate that banks are only one part of the ecosystem that is responsible for the creation of these properties and are not the only party that provides financing for the same.”

 
Image sourced from CNN. 

This article was edited by the editorial team of PropertyGuru. To contact them about this or other stories email editorialteam@propertyguru.com.my

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