Image
Icon

Directory

IconAlternative Investments
IconAsset Managers
IconAssociations and Institutes
IconBBBEE Consulting and Verification Agencies
IconConsumer Protection
IconCorporate Governance
IconCredit Bureaus
IconFinancial Planners
IconInvestment Consulting
IconLinked Investment Service Providers
IconListed Equities
IconOmbud
IconOnline Share Trading
IconParticipation Bond Managers
IconProperty Unit Trusts
IconPublications
IconRegulatory Authorities
IconStock Exchange
IconUnit Trust Fund Managers
IconWellness Programs
Advertise Here
  Subscribe To »

Banks’ slow turnaround times hurting SA property investors

Published

2012

Fri

16

Mar

Commercial banks are taking longer to approve commercial loans and issue bank guarantees. As a result, an increasing number of local property investors are finding themselves unable to finance an opportunistic investment timeously.

 

This is according to Gary Palmer, CEO of Paragon Lending Solutions, who says the new legislation forcing banks to look more carefully at loan criteria has added a significant time burden to the process of applying for a loan.

 

“It used to be realistic to expect a sale agreement to be finalised from deposit to bank guarantee within two weeks, or a month at the most. Now banks are taking much more time to complete the process, sometimes longer than six weeks,” says Palmer.

 

According to Palmer, as a result of the banks’ conservative lending practices and their slow turnaround times, many buyers of properties are not meeting their deadlines to issue guarantees for the purchase of properties. The risk for the purchaser is that they lose their deposit. Should the deal fall through and the seller sells the property for a reduced value then the defaulting purchaser may be liable for the shortfall.

 

Palmer explains that generally the sale of a property is subject to a condition that the purchaser obtains a loan to finance the transaction within a certain timeframe. He says the sale will be only be legally binding and enforceable once this condition has been met within the time allowed. “A purchaser breaches the agreement when the purchaser fails to fulfil conditions by, for example, not issuing the required  guarantee from the banks to approve the loan.

 

“What we have seen happening more and more is that the clients assume that the commercial bank will approve the loan, only to find it declined within a few days of the deadline to issue guarantees to the seller,” he says.

 

Palmer says this situation has become particularly prevalent in the property development industry over the past few months, as the banks will no longer consider residential investment property as sufficient backing for a loan. “Therefore, property developers with a significant asset base are finding themselves in a cash flow crisis and unable to take advantage of opportunistic purchases because banks will not approve the loan in time.”.

 

He refers to an example of a high profile property investor who had purchased an industrial property in Durban and required a bank guarantee to secure the property. “A week before guarantees needed to be issued, his commercial bank declined the loan due to the perceived lack of serviceability as a result of the upcoming expiration of the current leases.”

 

Palmer recommends that buyers who are experiencing similar hurdles in securing finance, look to an alternative lender who could issue them with a formal bank guarantee within seven days.  “Our average turnaround time is 7 to10 days for a guarantee to be issued. Most reputable lenders should have similar terms. Once the transfer occurs then the lender can work with the client to secure long-term bank financing,” says Palmer.

 
Source: Epic Communications (Pty) Ltd
 
« Back to previous page Print this page » |
 

Breaking News »

Actuarial Society to investigate unsecured lending practices

The recent curatorship of African Bank has shown that a one-size-fits-all approach to managing risk in the banking and lending industries is fundamentally flawed. Michael Tichareva, chairperson of the Banking and ...
Read More »

  

ITC announces launch of the SME Trade Academy

(Kigali/Geneva) The International Trade Centre (ITC) is establishing a trade academy for small and medium-sized enterprises (SMEs) to offer practical, vocational training online for SMEs and trade advisors in the ...
Read More »

  

Base Erosion and Profit Shifting Project high on SA Government Agenda

BEPS: the OECD releases the first round of recommendations that are intended to bring about the most significant reform of the international tax system since the 1950s The Base Erosion and Profit Shifting (BEPS) ...
Read More »

  

President Kagame opens the World Export Development Forum in Kigali

(Kigali, Rwanda) - President Paul Kagame today opened the World Export Development Forum (WEDF), which is taking place in Kigali, Rwanda. More than 800 delegates from 73 countries are attending the event. President ...
Read More »

 

More News »

Image

Healthcare »

Image

Life »

Image

Retirement »

Image

Short-term »

Image

Quick Survey »

  Sponsored by
Image
Can there be fair discrimination in the workplace?



|Results »
Image
Advertise Here

From The Glossary »

Icon

Participating Policy:

A life insurance policy entitling the policyholder to share or ‘participate’ in surpluses and profit which may be distributed by the company. Participation in surplus and profits is by way of ‘bonuses’ which reflect the difference between premium charged and mortality experience.
More Definitions »

 
 
By using this website you agree to the Terms of Use.
Copyright © Stoker Risk & ICT (Pty) Ltd 2004 - 2014.
All Rights Reserved.
Icon

Advertise

  Icon

eZine

  Icon

Contact IG

Icon

Media Pack

  Icon

RSS Feeds