Following the government’s decision to lift the moratorium on commercial housing construction loans, both Bhutan National Bank Limited (BNBL) and Bank of Bhutan Limited (BoBL) have resumed processing housing loan applications. However, demand for these loans has remained steady, with no significant surge post-moratorium.
A BoBL official stated that the demand for both commercial and non-commercial housing loans has remained relatively stable since the moratorium was lifted, with no notable increase in applications.
Since the moratorium was lifted, BoBL has received a total of 161 applications for housing construction loans. The bank has sanctioned loans amounting to Nu 789.84 million, ensuring that each applicant underwent a rigorous credit evaluation process. This thorough assessment included verifying income stability, evaluating debt-to-equity ratios, and assessing repayment capacity to minimize financial risks. The bank’s stringent measures aim to maintain financial stability while facilitating responsible lending in the housing sector.
The official further elaborated that the bank had proactively implemented risk mitigation measures following the suspension of housing loans to ensure financial stability and prudent credit management. In July 2024, the Bank of Bhutan Limited (BoBL) ceased financing for commercial housing construction and redirected its lending focus toward non-commercial housing loans for the remainder of the year. However, with a broader strategy to manage risk exposure, the bank extended the suspension to all housing construction loans—including non-commercial ones—effective January 1, 2025.
Despite these policy changes, the official emphasized that housing loan approval rates have remained consistent with pre-moratorium levels, suggesting that the bank’s credit assessment process remains stable and unaffected by the suspension. He also reassured that the moratorium had minimal impact on the bank’s overall business operations, reflecting the institution’s ability to adapt to shifting financial policies while maintaining operational efficiency.
Meanwhile, Bhutan National Bank Limited (BNBL) reported receiving 172 housing loan applications after the moratorium was put in place. The bank sanctioned loans amounting to Nu 560.18 million, with all applications successfully approved, highlighting its continued support for borrowers within the permitted lending framework. However, a notable decline in housing loan activity was observed compared to pre-moratorium levels. Between January and June 2023, before the moratorium, BNBL sanctioned Nu 2,809.80 million across 352 loan accounts. In contrast, during the four months following the moratorium’s lift (July to October 2024), the bank sanctioned Nu 1,143.90 million across 172 accounts—a considerable drop in both sanctioned amounts and the number of applicants.
On average, BNBL had sanctioned Nu 468.30 million per month before the moratorium, whereas post-moratorium, the monthly average dropped to Nu 285.97 million.
The moratorium on new housing construction loans was officially lifted on July 1, 2024, following a government decision driven by improving macroeconomic indicators. This policy shift was aimed at revitalizing the construction sector while ensuring that economic conditions were conducive to sustainable lending. However, despite the lifting of the restrictions, the Royal Monetary Authority (RMA) continues to oversee the implementation of the directive, closely monitoring the impact on financial stability. The RMA has retained the authority to conduct audits, assess compliance, and request additional reporting from financial institutions to mitigate any emerging risks.
The initial moratorium on housing and hotel construction loans was imposed in June 2023 as part of the RMA’s broader strategy to address economic vulnerabilities. The decision stemmed from concerns over excessive foreign currency outflows, high credit concentration in the real estate and hospitality sectors, and the increasing risk of non-performing loans (NPLs), which could have posed a threat to Bhutan’s financial stability. Recognizing these risks, the RMA extended the moratorium until June 30, 2024, allowing time for financial institutions to reassess their exposure and for the government to evaluate macroeconomic trends.
The lifting of the moratorium marks a shift in policy, reflecting confidence in economic recovery. However, with continued regulatory oversight, financial institutions remain obligated to adopt prudent lending practices to prevent excessive credit growth and maintain stability within the banking sector.
Nidup Lhamo from Thimphu
