Banks urged for easier lending standards

TIRANA, June 20 – Facing a sharp drop in sales, the construction industry which has been facing crisis impacts since 2008, has reiterated its appeal to banks to ease lending standards for apartments.
Hajredin Fratari, the President of Albanian Konfindustria, and a developer, says the construction sector remains in stagnation despite prices having dropped by up to 20 percent in certain areas of Tirana.
“Under crisis conditions it is necessary that banks ease their lending conditions, otherwise this situation will last having a severe impact on the country’s economy,” says Fratari.
However, the sharp rise in non-performing loans and lower demand from individuals has also influenced on the situation.
Latest Bank of Albania data show the construction sector leads the NPL portfolio with 29.6 percent, followed by trade with 21.3 percent and agriculture with 13.6 percent. In December 2011, non-performing loans for the real estate sector climbed to 12.55 percent from 9 percent a year ago. The NPL rate for individuals is estimated at 15.35 percent compared to 20 percent for businesses.
Once the key driver of the Albanian economy, the construction sector was the first to suffer the international crisis impacts in 2008 and has since failed to recover. Prospects seem grim as thousands of unsold apartments are only reported in Tirana while demand has significantly dropped due to falling purchasing power and tight lending standards as bad loans stand at a record 20 percent.
According to the latest Bank of Albania survey, the construction confidence index dropped to a historical record low in the final quarter of 2011 while companies’ expectations for early 2012 became more pessimistic.
According to INSTAT data the construction sector share to GDP dropped to 11 percent in 2010 down from 15 percent in 2008.