 Healthy Credit for the Property Market
ven.vn - 9/10/2010 8:20:00 AM
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Capital is still a major problem for many real estate businesses/investors because bank loan interest rates remain high and banks keep tightening credit for property businesses.
Nguyen Hoang Minh, the deputy director of the State Bank of Vietnam in Ho Chi Minh City, said that up to June 30, 2010, commercial banks in the city lent a total of VND91.302 trillion for real estate purposes, an increase of 16.7 percent over the beginning of 2010. This increase is not high compared to the increase of the same period last year.
Actually, banks consider providing loans for house and land purchase and house repair purposes a potential business. Many banks have launched new related products with different preferences.
The total value of loans that the ABBank lent to individuals for house purchase and repair just increased slightly over the same period of last year. Those who want to borrow capital from the bank want to wait for the loan interest rate to be reduced.
The TrustBank has kicked of its 'Nha Vinh Phuc' program, under which it lends customers that already have land a loan for constructing a house or buying a new house at an interest rate of less than 10 percent per year. The bank is to fund 70 percent of each capital demand. To reach this preferential credit, borrowers have to open a deposit account at the bank for a certain period of time but the sum that they have to deposit in the first month is only VND500,000 and the sum they deposit after that increases monthly until the deposit is equal to 30 percent of the loan they get from the bank.
Many commercial banks said that loans that they lent for house purchase purposes in the first half of this year is just a little more than those in the first six months of 2009 in terms of value. This is partially because customers want to wait for the loan interest rate and the real estate price to further decrease. Banks in general currently apply a 15-18 percent per year interest rate to loans for land and house purchase. The Asia Commercial Joint Stock Bank (ACB) now offers an interest rate of more than 16.5 percent per year for loans for apartment purchase purposes, while the Vietnam Export Import Commercial Joint Stock Bank (Vietnam EXIMBANK) offers a 16.56 percent per year interest rate and the Bank for Foreign Trade of Vietnam (Vietcombank) offers a 15.55 percent per year interest rate for loans for the same purposes.
State Bank of Vietnam Circular 13/2010-TT-NHNN, which refers to safety of credit institutions and will take effect on October 1, 2010, has stricter regulations for provision of credit for real estate purposes. The reality shows that most of bad debts of many banks are loans for real estate purposes, and that the banks now refuse to earn a profit by providing credit for real estate purposes and only accept lending loans to individuals that need capital for buying land and houses on hire-purchase.
Dr. Do Thi Loan, the general secretary of the Ho Chi Minh City Real Estate Association, said that commercial banks need to establish financially independent member units such as investment and development banks and financial companies to provide professional services related to real estate like financial leasing, loan insurance, real estate securities issuance guarantee, and real estate investment fund establishment services and prepare for directly issuing real estate bonds and certificates or mobilize capital for real estate projects through the securities market.
This year, the real estate market's development is expected to further depend much on bank credit. Flexible monetary and financial policies are important to solve a number of problems that deter the market from development. To promote the real estate market, the State should temporarily stop requiring payment of a personal income tax related to property business and amend and supplement regulations on mobilizing capital for and lending loans to real estate purposes. The State should also permit real estate projects' investors to sell no more than 20 percent of their apartments outside the official real estate exchange to help them to get more capital for accomplishing their projects./.
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