» » Real estate firms preparing to hibernate for winter

Nguyen Tran Nam, Deputy Minister of Construction, said that he is not too pessimistic about the property market, but it is clear that real estate firms need to forage for a lot of food to help them survive until the market recovers.

The record high lending interest rate of 21% and the policy on tightening the monetary policy all have burst the bubble of the real estate market.

The record high lending interest rate of 21% and the policy on tightening the monetary policy all have burst the bubble of the real estate market. Real estate developers have been worrying about the falls of the real estate market – once considered fertile land for investors.

Deputy Minister of Construction Nguyen Tran Nam said at a meeting with tens of big real estate firms nationwide late last week that the firms needed to be patient and wait until the market recovers.

“I would say that real estate firms should not think of asking banks to lend money to the firms at preferential interest rates. We need to go our way,” Nam said, meaning that it will be of no use to ask banks to provide loans to fund real estate projects.

Apartment prices have decreased dramatically by 60% over the end of 2007, which, according to real estate firms, has pushed them into a ravine. Meanwhile, the interest rate has soared to 21% and banks are limiting funding real estate projects. Investors have no other choice than delay projects and wait.

Tran Minh Hoang, Chairman of Vinaland, also said that real estate firms now have to tighten their belts and wait. With such a high interest rate and inflation rate, the real estate market’s stagnation proves to be unavoidable.

Hoang said that members of the real estate market, both real estate developers and clients, have been heavily relying on bank loans. Some developers need to borrow 70-80% of the capital needed to run projects, while clients also have to borrow money from banks to purchase houses and apartments. Therefore, as soon as banks limit credit, real estate developers and clients both suffer.

Hong Thi Kim Tuyen, Chairman of Saigon Real Estate Corporation, complained that with the lending interest rate overly high and businesses still not being able to access bank loans, her company is facing difficulties with projects being executed in HCM City and neighbouring provinces, including Tay Ninh.

Meanwhile, Dang Hoang Vu, General Director of Thanh Binh Real Estate and Trade Company, said that banks are being irresponsible towards clients.

For example, a bank and client sign a contract on funding an apartment purchase, under which the client will pay by installments within five years at the interest rate of 12%. After one year, the bank has the right to unilaterally raise the interest rate, to 30%, for example. Clients will not be able to pay bank debts. Real estate developers will die, and so will clients.

Vu said that with the current high interest rates, medium class and poor people will never have accommodations.

Nam of MOC said that real estate firms should find ways out by issuing projects bonds, corporate bonds or setting up real estate funds in order to survive the current difficult period.

However, firms do not think that these are the best ways for now, as they are essentially just contracts to borrow money and do not have legal value. Meanwhile, the government still considers these methods of capital mobilisation.

Vietnam Real Estate

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