The Real Estate Development Association (REDAL) issued a statement decrying the pressure they claim banks are exercising on them. The statement said that the recent surge in sales is not an indicator that the developers’ situation is improving.
At a time when real estate developers were hoping that banks would take measures that would alleviate their burdens by reducing interest rates on their loans and by rescheduling their debt, they were surprised that the role of the banks was limited to motivating their depositors to acquire real estate from indebted developers. The result was that the banks collected some debts from the developers, without adopting any other measures.
REDAL said that while this limited role of the banks partially solves the problem of some depositors, it completely exacerbates the predicament of developers. While depositors are freed from the risk of withholding their deposits, the developers sink into debt with accruing interests while the banks are not adhering to the procedures and directions outlined by the Central Bank.
In light of the recent reports on a surge in real estate sales activities, REDAL said that there is no real recovery witnessed by the sector, especially in light of the impossibility of reinvestment by developers burdened by debt and a cost of construction that has reached unprecedented levels. With the worsening of the economic and financial crisis, the real estate development sector has declined to low levels as indicated by the numbers of building permits in all regions.
REDAL said that the real estate sector is not part of the welfare economy. Its rescue should not be postponed, because it is the basis of a productive economy. Its investment size reaches about $20 billion. the sector’s collapse will bring down with it about 70 professions, crafts and auxiliary industries. The persistent neglect of this vital sector will lead to the collapse of the system on everyone, according to REDAL. “The banking sector should not assume the role of the victim but rather the role of the partner in the rescue,” it said.
“Facing this reality, what is required is the approval of a series of incentives that include freezing interest rates levied on real estate developers, rescheduling of debt, cessation of pressure of sending notices and deadlines, and making available subsidized housing loans as soon as possible, as part of a national housing plan that the government is asked to adopt as a priority,” said the statement.