Banks Explain Real Estate Stimulus

In fact, leaving behind concerns over the safety of credit institutions, banks are also businesses. They care about the biggest profit from their operations, regardless of consumer and manufacturing loans.

 

In the latest three months, Vietnamese banks started cooperating with developers to provide soft home loans, which are characterised by so-called interest rate subsidies. In a prolonged lacklustre market, the opening of credit valve for property market was said to be necessary to boost the market heavily reliant on bank loans. This move was led by big lenders like Vietinbank, Vietcombank, BIDV and VIB. Their home loan packages, worth thousands of Vietnamese dong, lend up to 70-90 percent of apartment value.

 

In reality, capital flows from banks have left a positive impact on the real estate market. According to a survey in late July, realty transactions resumed, although they were not as active as earlier.

 

A Vietcombank representative said zero-interest loan received positive response from customers. The Hanoi-based lender officially extended the maturity of home loans for purchasing apartments at Indochina Plaza Hanoi (IPH) for another month (August 5 to September 5, 2012).

 

A representative from Indochina Land, the investor of IPH, said interest rate subsidy will trim earnings for the company and banks, but it is necessary to extend the programme for one more month to sell more products.

Nguyen Tat Thinh, Head of Personal Banking Division, VietinBank, said seeing the very high housing demand of financially limited customers, VietinBank launched a VND5,000 billion home loan programme for personal borrowers in July. This was the biggest preferential credit programme for individual customers launched by VietinBank.

 

After a period of mixed public response to real estate stimulus, the VietinBank representative added that “Even this, the biggest stimulus programme, meets only a fraction of housing demand. If demand continues to grow strongly, VietinBank will increase the value of the programme or launch new packages with greater value."

 

According to industry insiders, the current hardships of the real estate market are not over and a decisive factor to overcome this tough time is credit policy. Once credit is loosened, interest rates fall and the real estate market will revive.

 

Nguyen Van Duc, Deputy Director of Dat Lanh Real Estate Company, said that compared with investment costs, property prices are somewhere in the bottom. The demand is huge but house prices are unaffordable for most buyers. They need to borrow money from banks to buy houses. Actually, without interest rate subsidy, many people do not dare to borrow. Therefore, the best way to create liquidity for the market is to open access to low-rate loans for home buyers.

 

According to VnEconomy, many banks want to increase real estate credit to enhance market liquidity and support people to buy houses. But, that does not mean banks will be easy on all real estate projects when investors ask for loans for home buyers.

 

“Our standpoint is, in the present context, we are willing to share difficulties of businesses and support them to live through this crisis period because it relates to the operating efficiency of banks. However, the support must be selective,” said the Vietinbank representative.

 

If borrowers really need money to buy houses, lending stimuli from banks are necessary. However, they must carefully evaluate the prestige and capacity of investors, and quality, schedule, location and price of projects, before providing any support.

 

It is very dangerous for banks to use short-term deposits to lend property projects because they want to achieve credit growth targets or make a profit. That short-term business thinking is unsuitable for commercial banks.

 

Banks have confirmed that interest rate support for home buyers will be carried out carefully and supported projects will be limited to ensure safety and effectiveness for all stakeholders.

 

However, the number of supported projects is growing rapidly. At this point, VietinBank is dealing with 43 property investors to fund home loans, an increase of 12 investors since last month.

 

Vietcombank is now supporting 38 projects.