More than 70% of real estate investment capital is bank loans. (Photo: chinhphu.vn)This was expressed by Prof. Ngo Tri Long, leader of the Ministry of Finance'sPrice Research Institute, during a seminar on the revitalisation and sounddevelopment of capital for the domestic real estate sector. The event, held onApril 19, was organised by the Vietnam Financial Consulting Association (VFCA).
Dr. Le Minh Nghia, VFCA's deputy chairman, said during the discussion that themajority of capital directed towards the real estate market is substantial inscale, and typically takes the form of medium to long-term investments. However,for years, Vietnam’s property market has been heavily reliant on bank credit,amounting to approximately 2.6 quadrillion VND, and constituting nearly 20% ofthe nation's total capital.
In light of this, recent endeavours have sought to diversify capital sources,tapping into alternative channels such as equities, bonds, and foreigninvestment, with a view to fostering recovery and growth within the real estatemarket.
However,according to Nghia, from the last six months of 2022, the real estate marketand businesses have faced many difficulties, especially in terms of capitalliquidity and legal procedures.
Besides that, lending interest rates, petrol and oil prices, building materialprices and labour costs have increased, leading to higher production costs forreal estate businesses. Those factors have caused many projects to stop.
Especially,the tight control of credit by the State after the mistakes of real estatebusinesses in issuing individual bonds and manipulating stock prices have madeit difficult for real estate businesses in approaching capital, said Nghia.
Toremove those difficulties in credit for the real estate market, Long said thatit is necessary to focus credit on eligible and feasible real estate projectsand the housing segment that the market has real demand for.
Now, the State Bank should consider classifying property projects and investorsto stabilise the market as well as the psychology of homebuyers, Long said.
Thesegment that needs difficulties removing right now is social housingproducts, he said.
TheState needs to control credit risk for the real estate segment, and also followgranting of credit for property enterprises and projects.
Otherfactors are to improve the quality of the statistical system with regular updatedinformation on real estate projects with large outstanding loans, and to assessthe real estate market and investors, aiming at having suitable creditsolutions.
Inaddition, the State needs to implement a credit package of 120 trillion VND forsocial housing, a programme on providing loans for developing social housingand worker housing projects, and upgrading or re-building old apartments.
The banking system should have solutions to encourage businesses to developsocial housing projects and housing for workers.
Longsaid that in the past three years, the COVID-19 pandemic caused the real estatemarket to fall into a difficult situation. Many real estate businesses wereinefficient and had shortages of capital.
“Thescale of Vietnam’s real estate market is not large compared to other countriesin the region, but more than 70% of real estate investment capital is bankloans, and 65% of collateral to get the loans is real estate,” Long said.
He also said that after a period of massive lending, banks and creditinstitutions are now more careful with real estate projects.
Besides that, in 2023, realestate businesses are under great pressure from the maturity of bonds.
Accordingto Long, the number of bankrupt real estate businesses has increased by nearly40% in the past year.
Accordingto incomplete statistics from the annual financial reports of real estatecompanies listed on the stock exchange, the value of real estate inventoriesand unfinished construction projects by the end of 2022 had a very strongincrease.
“Thismeans the businesses do not have more capital to deploy further. Without timelyand effective solutions, the real estate market may slide into crisis,adversely affecting the goal of maintaining macro-economic stability and socialsecurity," Long said.
Therefore,the Government has issued decrees and resolutions to remove difficulties incapital for the real estate market.
Thoseare the Government's decrees on the offering and trading of individualcorporate bonds in the domestic market and the offering of corporate bonds inthe international market.
Inaddition, there is a project on the development of 1 million social housinghouses by 2030 and Resolution No. 33/NQ-CP of the Government on solutionsremoving and promoting the development of a healthy and sustainable real estatemarket.
According to Nghia, this is the Government's determination toremove obstacles and promote a healthy and sustainable development of the realestate market, contributing to the process of socio-economic recovery anddevelopment after the COVID-19 pandemic./.
VNA
