Banks and Investors Teaming up to “Clear out Inventory”

 

According to experts, if getting access to loan capital from Vietnamese banks was extremely hard several months ago, it is easier for real estate businesses now to get their hands on banks’ loans. A move by banks to reduce lending rate is a good signal that could help the real estate market recover faster. Vietnam International Bank (VIB) recently introduced a real estate loan package with a favourably low interest rate of only 9.9 percent a year in the first three months for customers who need the money to purchase, build or repair houses. Accordingly, VIB’s real estate loan package totals up to VND1,000 billion with a maximum lending amount of up to 90 percent the value of mortgaged assets and maximum lending period of 180 months. This loan package is effective until September 30 2012, or when the lending amount runs out. Unlike other programs which only have favourable real estate loan packages to cater to specific projects, that of VIB is applied in a grand scale and directed towards all customers who need to purchase, build or repair houses

 

Likewise, Vietcombank has publicised an agreement to initiate housing loan packages in projects of Ba Ria-Vung Tau House Development Jsc. (Hodeco) in order to boost demand in the real estate market. Furthermore, in order to help people who are interested in apartments in the Indochina Plaza Hanoi Project, from July 5 to August 5, Vietcombank has initiated loan contracts with zero percent interest rate along with a year of grace period from the first disbursement day according to the credit contracts. Besides, house buyers have the opportunity to borrow up to 60 percent the value of their apartments in 20 years.

Not only banks, but many investors also take their chances by subsidising interests for customers as in the case of investors in the Nam Do Complex project (Truong Dinh). Accordingly, customers who buy houses will enjoy a 4 percent cut off interest rate from the investors. At Golden Land project (Nguyen Trai), investors are committed to subsidising interest rate for customers by extending the borrowing period.

According to experts, investors teaming up with banks to boost real estate demand is a positive trend which helps the market go through this difficult period. “The decision of the State Bank of Vietnam to reduce interest rate not only increases consumer demand for lending capital but encourage the credit growth of commercial banks as well as the output for the real estate market,” remarked Mr Nguyen The Diep, Chairman of the Board of Song Hong Corporation.

 

According to statistics from CBRE Vietnam, in the fi

Mr Nguyen Huu Nghia, Acting Head Inspector of the State Bank of Vietnam Real estate outstanding debt as of May 2012 is VND197,000 billion, representing 10.3 percent the total amount of bad debts in the banking system. However, as of late May 2012, credit agencies have put VND67,300 billion or 57.18 percent of total bad debts on reserve to counter risks.

rst six months, there are only 3,000 apartments on sale, a tiny portion of the 25,000 apartments on sale in 2011. Although the State Bank of Vietnam has relaxed its credit policies and lending rate is going down, increase in the number of real estate transactions is not significant as of the end of the second quarter of 2012. Experts believe that recent moves by commercial banks have left a positive impact on the real estate market which in the past was like body suffering from “cancer”. There has already been a positive change in the apartment market when many projects, especially the medium-type-apartment ones, begin to put apartments on sale to find new customers

 

Mr Vu Xuan Thien, Deputy Director of Housing Market Management Bureau (under Ministry of Construction) commented that this is the right moment for home buyers who have real demand, because they have the right to choose the apartments as they like them and the right to refer to transparent sale prices of more than 1,000 real estate exchange boards.

 

Mr Nguyen Huu Cuong, President of Hanoi Real Estate Club said, “There are 90 percent of real estate businesses mainly relying on loan from banks in order to survive; thus a fall in the interest rate will have direct impacts on the market. At the same time, reducing interest rate will relieve real estate businesses and home buyers of the financial burden.” According to Mr Nguyen The Diep, a fall in interest rate is a good “cure” to help revive the real estate market. Reducing interest rate will help businesses get access to loan capital more easily and have the chance to reinvest.

 

Regarding the real estate market after a fall in interest rate, experts believe that if inflation rate decreases, the real estate market will warm up in the early 2013