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Magazine digest -- Banks venture into urban renewal
2010/07/15 18:05:49 |
The government is encouraging urban renewal with incentives that attract not only construction companies but banks as well, and the banks are already winning bids.
Before setting up a dedicated unit for urban renewal in October 2009, First Commercial Bank entered the field in 2006 when the Construction and Planning Agency modified regulations promoting urban renewal, giving the bank an edge over competitors including the Land Bank of Taiwan, which specializes in realty.
Interest rates for urban renewal project loans can reach 3 percent to 4 percent, higher than mortgage or syndicated loan rates, making it a profitable business for banks.
Li Cheng-hsiang of First Commercial's Urban Redevelopment Department said banks have advantages in credibility and fund-raising ability that allow them to simultaneously handle more projects than resource-limited construction companies are able to manage.
The business of urban renewal requires long-term investment before the deal is signed, however, especially projects organized by a building's residents. The bank said they spent three-and-a-half years setting up some 70 meetings with residents of one project -- and those were all free of charge.
The Taipei City government is expected to announce in August that the extra building capacity allowed in urban renewal project will be raised from 1.5 to two times legal capacity under certain circumstances. The growing market will be led by banks that can manage lending risk while winning over and integrating residents of buildings to be reconstructed. (Business Weekly 1180)(translated by Kay Liu) enditem/bc
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