TOKYO -- Japanese regional banks are growing more cautious in lending to customers looking to build or purchase rental properties, a Nikkei survey found, as the fallout from Suruga Bank's loan scandal reverberates through the sector.
In the survey of 100 regional banks, 34% said they will move with caution in making such loans, while 66% responded that they will decide on a case-by-case basis. None said they plan to lend aggressively.
In Japan, owning rental units has been a popular solution to landowners wishing to bring down their tax bills or those simply looking for rental revenues. And this has been one of the few growth areas for regional lenders facing rock-bottom interest rates.
As of the end of September, the balance of such loans stood at 22.94 trillion yen ($202 billion), up 1.3% on the year, with regional banks holding roughly 65% of the total. In the survey, 81% of regional lenders said the balance of such loans has risen since a year earlier.
But Suruga's improper lending practices that have left many borrowers struggling to make repayments seem to have cast a pall over this boom. Forty-two percent of respondents said they were tightening the review process or considering doing so by convincing borrowers to take out smaller loans or by consolidating decision-making at the headquarters.
If regional lenders cut back heavily on apartment loans, it could have a negative impact on the real estate market. Japan's big banks have already curbed such loans over the last one to two years. New apartment loans fell 14% to 734.4 billion yen in July to September, the seventh consecutive quarter of year-on-year declines, according to the Bank of Japan.