Ziraat once more at the government’s behest

Emre Deveci / Şehriban Kıraç

With business coming to a standstill in real estate, seen as being the economy’s locomotive for the past sixteen years, the AKP government is undertaking new steps to breathe life into residential sales. The government, having embarked on VAT and title deed fee discounts at the weekend, yesterday instructed the big banks, chiefly Ziraat Bank, to provide low-interest home loans. Binali Yıldırım, addressing the General Assembly of the Banks Association of Turkey, said, “Ziraat Bank and the other banks will hold a campaign to reduce stocks in the residential property sector.” The government, which for a long time has resorted to publicly-owned Ziraat to fund large projects, has once more called Ziraat Bank to its aid to eliminate the residential property stock.

Stock of two million

The residential property stock in Turkey currently exceeds two million. With offices, the stock is said to have risen to 1.5 million square metres. This equates to 15,000 offices averaging 100 square metres. As to malls, where an upswing set in at the start of the 2000’s, saturation has led to a slump in investment. According to a report compiled by Cushman & Wakefield, the first quarter of this year saw a like-for-like exchange rate-related decline of 22% in high-street store and office rents. Overall residential property sales in Turkey fell by 14% in March 2018 to 110,905 as against the same month last year. This amounts to the highest drop being recorded since July 2016 when the coup attempt took place. The like-for-like decline in February had been 5.4%. The collection index in the sector has been in constant decline since 2013. Significant difficulties are now being experienced over collection. Prime Minister Binali Yıldırım, in heralding the launching by Ziraat Bank of a campaign aimed at reducing stocks in the residential property sector, said that a plan of action with the involvement of Ziraat Bank and the leading banks in the sector would be announced within a few days and residential property loan interest rates would be reduced to around one per cent. Within the said project, residential property loan interest rates, which currently stand at an average of around 1.25% in the sector and have even risen to the level of 1.35% at certain banks, are expected to be reduced to around 1%. Former Central Bank Governor Durmuş Yılmaz has pointed out that the said plan did not conform to the logic of the market and would impair the health of the banking sector. Saying, “The government is aware that things are not going well in the economy,” Yılmaz said that there was a wish to cover up problems with artificial measures. Yılmaz, recalling that the banking sector was financed with foreign currency loans taken out abroad and exchange rates had increased, noted that reducing interest rates by order could unbalance the banking system and low-interest loans provided by publicly-owned banks would amount to the Treasury relinquishing a degree of income and an increase in the debt burden. Yılmaz, stressing that resources should be devoted to productive investments and not residential property, emphasised that, going forward, Turkey’s construction-based development model had to change. The former Central Bank Governor, opining that inflation was at the root of the problems in Turkey’s economy, said that the government was stoking inflation by taking measures that would stimulate demand and push potential growth to the upper limit.

This model will collapse

Certain bankers, stressing that commercial banks should not give loans for projects like housing, damns, bridges and roads, were also of the opinion that such a residential property financing model would collapse.

78 billion lira in loans restructured

Banks Association of Turkey Chair Hüseyin Aydın explained that 78 billion lira in amounts due had been restructured and that restructured loans accounted for 3.8% of total loans. Aydın also recalled that non-performing loans made up 2.9% of total loans. Aydın, referring to loan restructuring that has come to attention with Yıldız Holding and Doğuş Holding’s applications, said, “The legal infrastructure pertaining to restructuring must be completed.” Aydın, saying, “Maturity extensions are being granted and financial and physical restructuring being conducted with loans to individual and corporate customers who are experiencing temporary payment difficulties and are struggling to repay their debt due to mismatches between cash flows and debt maturities arising from their sensitivity to fluctuations in growth or interest rate, exchange rate or maturity risk,” commented, “Customers who apply for restructuring must display the necessary sensitivity over strengthening equity and restructuring, not just loans, but activities.”

Legal framework essential

Aydın, noting that, just as in the international arena, restructuring procedures needed to be furnished with a technical and enacted statutory framework, criticised the government in saying, “Unfortunately, we have been unable to receive a positive reply to our request in this regard for a long time. It is also a fact that unfortunately some of our bankers who have granted maturity extensions having obtained additional collateral or have taken restructuring decisions in exemplary cases in which complete repayment of the loan has probably been achieved thanks to this have been sentenced to imprisonment.”

Loans showered on cronies

Ziraat Bank, which was established to support farmers and the development of agriculture, has been used in the AKP’s time in office to finance the government’s large construction and media projects. Seventy per cent of the 4.5 billion euro loan for the third airport was procured from publicly-owned banks, with Ziraat Bank heading the list. Ziraat also numbered among the banks that financed the third bridge project. Ziraat Bank further played a role in the sale of the Doğan Group to the Demirören Group, the largest media sale in Turkey’s history. Of the 916 million dollar sale price, 700 million dollars was supplied in the form of a low-interest Ziraat Bank ten-year loan with a two-year repayment holiday. A portion worth 200 million dollars of the 630 million dollar pool created to buy Sabah and ATV owned by the Çalık Group was supplied by Ziraat Bank. The Çalık Group, which bought the Sabah Group from the Savings and Deposits Insurance Fund for 1.1 billion dollars, took out a loan totalling 750 million dollars of 375 million dollars each from Halk Bank and Vakıfbank. In the same period, Hüseyin Aydın undersigned the loan as Halk Bank CEO. Hüseyin Aydın currently holds the post of Ziraat Bank CEO.

General meetings postponed

Ziraat Bank’s, Halk Bank’s and Vakıfbank’s general meetings have been postponed for two years at the government’s behest. The general meetings, postponed last year due to the referendum, are being postponed this year because of the early election.

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