Myanmar’s property market will slump now that banks in the country have stopped offering new home mortgages following the military regime’s announcement that it will punish seven domestic banks it accuses of violating a Central Bank of Myanmar cap on home mortgages.
Access to home loans will be curtailed, so the property market will slump, the owner of one construction company said. “Builders will suffer if apartments do not sell. They are already suffering from the high cost of construction materials. The outlook is not very good,” he added.
“People will have difficulty accessing home loans,” another developer said, explaining: “We sold an apartment recently. The buyer had made a 50 percent down payment and planned to apply for a home loan for the remaining 50 percent. But he could not get a home loan from banks, so he said he would not buy [the apartment] and we had to return the money.”
Property prices soared in Myanmar after the 201 coup, with many buyers financing their purchases with long-term mortgages.
On Sunday night, however, the junta announced that it would punish seven private banks for exceeding the central bank’s limit on how much they can lend to home buyers. The banks are accused of exceeding the limit, set at 5 percent of total lending, by as much as 16.34 percentage points.
On the regime’s hit list are United Amara Bank owned by the sons of former minister Aung Thaung, AYA Bank owned by crony Zaw Zaw, Yoma Bank owned by tycoon Serge Pun, Construction, Housing and Infrastructure Development Bank, Myanmar Citizens Bank, SME Development Bank and Myanmar Metro Bank.
The central bank caps the total amount that domestic banks can lend for housing loans of more than three years in duration at 5 percent of the bank’s total lending portfolio. The cap was introduced by the central bank in 2019 when it allowed domestic banks to offer home mortgages of more than three years in length.
The announcement from the junta said the seven banks would be fined under Section 154 of the Financial Institutions Law.
Directors of Yoma Bank are temporarily barred from leaving the country, The Irrawaddy has learned. The bank is accused of exceeding the lending cap by 11 percentage points.
Under Section 154 of the Financial Institutions Law, violators can be punished by warnings, fines, and restrictions on or suspensions of their operations.
The notice that banks will be punished for exceeding the lending cap will only affect new applications for home loans, not existing borrowers, business owners said.
Most banks stopped offering home mortgages in June when the regime took action against some property developers for allegedly destabilizing the financial market by selling Thai condominiums in Myanmar.
One developer said that Yoma and other banks suspended home loans at the time but only recently officially announced the move.
Yoma Bank CEO Serge Pun, also known as Theim Wai, was investigated for allegedly financing the sale of Thai condominiums in Myanmar with long-term home loans.
One economist said: “Only those who have ties to banks and authorities received loans [to buy homes] and were able to construct buildings despite inflation and high prices [and] they will be the ones most affected. The effect on ordinary people will be limited.”
