» » ACBR mulls over new property service

ACB Real Estate Joint Stock Company (ACBR) is pondering a new property service called ‘property repo’ featuring financial support for individuals and investors who are in need of short term loans.

Pham Van Hai, general director of ACBR, told the Daily that the so-called ‘repo’ service was formed from stock market ideas and that the local property market had potential for such a service.

The term ‘repo’ represents a repossession of property from a buyer who has defaulted on payment. It means a service company will pour money to take over a property for a limited time.

Hai said the service would target individuals and investors who had houses or apartments and a dire need for money, but for some reason cannot mortgage their properties for loans and do not want to sell the house or apartment they love.

Hai explained that unlike normal property trade, the repo service provider would buy a property and then permit the seller to buy it back within a limited time, normally from three to six months.

Regardless of the property’s market price, the deal allows the seller to buy back his beloved property at the same price the company paid, plus a certain difference. Normally, the disproportion is higher than interest rates offered at banks, Hai said.

For example, a house is appraised at VND2 billion and the difference is around 2% per month. If, after three months, the seller wants to buy back the house, he will have to pay VND2 billion plus VND120 million (VND2 billion x 2% x 3 months) to the service company.

Hai says the deal does not allow the company to resell the property to a third party but it is allowed to use the property for other purposes, such as leasing. If the customer does not want to buy back the property, the company will resell it.

Hai, however, noted that the service was not created to ‘rescue’ cash-strapped investors who suffer from high interest rates to refinance their investment. It is just a service in which the company can make money and customers can get money for short term investments.

Hai said once the company launched the service, it would target saleable houses or apartments in good property projects to minimize risks.

Repo service providers often appraise a property below the true market value so they can get a bargain property from sellers who do not want to buy back their properties.

Hai refused to say when the service would be launched, saying that the company was waiting for capital from its shareholders.

Source: The Saigon Times

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