By Crystal Hsu / Staff Reporter
National banks hiked interest rates on land finance for urban renewal projects by 12.5 basis points, even as the central bank spared them from credit scrutiny to support government efforts to remove buildings old and dangerous.
Interest rates of 1.8% for urban renewal projects are increasingly rare, although the figure is up from 1.6% before the adjustments, the Chinese-language Commercial Times reported yesterday. .
On March 17, the central bank raised policy rates by 25 basis points, but refrained from requiring similar adjustments for urban renewal projects to avoid slowing efforts to improve building safety. .
Widening interest margins do not incentivize banks to increase financing for urban renewal projects, according to the report.
The Financial Supervisory Commission recently introduced capitalization requirements for domestic lenders to curb property speculation, she said.
The commission previously excluded urban renewal projects from its capitalization calculations, but did not this time, adding pressure on the profitability of such projects, according to the report.
Soaring labor and construction material costs are squeezing profit margins from urban renewal projects because they take a long time to bear fruit, the report says, adding that it would take six to eight years to implement an urban renewal project, not to mention managing issues regarding the original occupants of the property.
Construction costs have risen from NT$100,000 per ping (3.3 m2) to NT$250,000 per ping over the past three years, an unbearable burden for small and medium developers, according to the report.
Some have tried to stop urban renewal projects because they don’t think they can pass the extra costs on to buyers, the report said.
Renovation projects in Taipei’s Daan (大安) and Songshan (松山) districts would remain in demand, but projects elsewhere could face uncertainty, he said.
Big, deep-pocketed developers are showing keen interest in taking over urban renewal projects over which they could have full control, but are lukewarm about joint ventures, he said.
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