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Banking

Qatar: Bailout to fuel property growth

Running a bank in Qatar appears to be getting easier all the time. The local government’s latest bailout plan for its financial sector will involve the state clearing up to $4.1 billion of troubled real estate loans and investment from lenders’ balance sheets.

Details have been sparse – for example, about who will manage the assets. With the government lacking institutional capacity to collect repayments, the job might go back to the banks – potentially allowing lenders to reap fees for this.

The overall aim is to boost profitability in the sector and get firms lending again, to spur the economy outside the hydrocarbon sector.

Local boon

Most assume the plan is principally concerned with banks’ local exposure. But if banks are keen to redeploy the capital to assets that generate better revenue, most of the cash will flow back to the local real-estate market, providing a big boon for local developers. Much of the debt issuance by such companies as Qatar Telecom is in the dollar market, for example. Property development and the SME sector might be the only other avenues available to banks that are eager to lend.

Indeed, there might be a moral imperative for banks to lend more to real estate.

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