Viet Nam’s real estate market is suffering a severe lack of capital as banks shut off credit flows to the industry.
The credit crunch is not only having a negative affect on property investors though. Banks are also refusing to lend to private individuals who wish to borrow money to buy their own home.
Put in a difficult position, many construction companies have this year deliberately slowed the speed at which their projects are being built. They are prepared to wait until macroeconomic stability returns.
A clothing manufacturer in HCM City has been forced to delay the construction of a commercial and office centre planned for District 5 after two partners postponed their involvement due to the acute credit shortage.
"Currently, it is too difficult to mobilise money from banks or the stock market," the company’s director said.
As well as having difficulties in obtaining new capital, investors with existing loans are being squeezed by dramatically rising interest rates and pressure from banks to pay back debts. Some property investors, who often must wait a long time before they see a return on their investments, have reluctantly sold properties at low prices to settle debts or raise capital.
Some enterprises have raised money by issuing bonds – but this isn’t an option available to everyone. "Only if people believe that an enterprise will be able to acquire capital from the banks, is it able to issue bonds," said Tran Minh Hoang, chairman of the Vinaland Real Estate Company.
The best solution at the moment would be for the government to re-examine its Real Estate Law, Finance Law, Penal Code and Land Law, he said.
International property companies obtain capital from many sources, such as insurance funds, retirement funds, the State and financial agencies. However, Viet Nam’s real estate industry is almost completely reliant on the banks. If the domestic banking industry continues to restrict lending for construction, the supply of property, already a chronic problem in Viet Nam, will only get worse.
Dang Hoang Vu, director of the Thanh Binh Real Estate Trading Joint-stock Company, blames the banks for the current situation. The government and credit agencies provide finance to the property market through the banking industry. And it is the banks that have retreated from their role of ensuring that construction projects are realised and managing the flow of capital to the property industry, he said.
Private individuals with average household income are also being hit by rocketing interest rates. Unable to buy a house without a bank home loan, house-hunters must be prepared to take on a debt with an interest rate as high as 21 per cent.
Vietnam Real Estate