First Global going after Airbnb real estate investors - Up to $150m loan on offer
The real estate sector continues to see a spike in residential developments as investment properties that are targeted at the growing homeshare market.
And at least one bank has designed a loan programme around it.
First Global Bank Limited says it has disbursed $130 million in loans since January to finance Airbnb-related properties, but did not disclose the number of borrowers or projects funded.
Arlene Williams, vice-president of personal and business banking, indicated that First Global is willing to lend a lot more than the current uptake, saying that the bank has a cap of $150 million per project funded but that the applications were averaging $5 million as the loans are mostly taken up by borrowers who already have a home but who need funds for renovations.
“There is an unrestricted loan pool for this industry. Lending is considered on a case-by-case basis.” Williams said.
The loans are available to small and medium enterprises, or SMEs, funding for some of which is sourced through the Development Bank of Jamaica under a programme, she added. First Global’s loan also targets other short-term rental projects in addition to Airbnb stays.
Jamaica’s homeshare or short-stay market grew by 62 per cent in 2018, an estimate based on Airbnb bookings that rose from 55,000 in 2017 to more than 89,500 last year, as cited by the Ministry of Tourism.
The average trip length for Airbnb stays was about five days, and the typical host in Jamaica earned revenues of up to US$2,600 in 2018.
Williams said that the Airbnb loan was introduced in November 2018 in response to the growing short-term rental market, which was “seen to be in accelerated growth mode”.
“We realised that across the banking industry there was no specific product for this market, so we tailored a loan for persons wanting to expand or upgrade their homes or small hotels to take advantage of this opportunity,” Stewart said.
The target market includes Airbnb hosts, guest house operators, and small hoteliers who can get access to the product for expansion of property; renovating and upgrading of existing property; and/or construction of property for bed and breakfasts, small hotels and other types tourist accommodation.
“We will accept as security the property that is being upgraded or other kinds of appropriate collateral. Where the collateral cannot guarantee the full amount of the loan, we work with the Development Bank of Jamaica to provide partial collateral guarantees for SME borrowers,” Williams said.
The loans are priced at a starting rate of 8.75 per cent per annum, with a moratorium of 12 months on the principal and 10 years to repay, Williams said.
“We understand that with this industry, time is needed for construction or renovations, which means the Airbnb host or small hotelier is often not in a position to immediately start loan repayments. The moratorium allows room to build out the investment before starting repayments,” the bank executive said.
She added that as part of the loan process, the SMEs get assistance to become “financing ready”, which includes referrals for the DBJ’s technical assistance voucher programme.