» » Tough credit hits realty sector

VNRE - Property developers are being hammered by shrinking credit options.

Nguyen Van Duc, deputy general director at Dat Lanh Property Company, said banks were more reluctant to sign new funding contracts with property developers in 2011.

“For signed credit contracts, banks are also slowing the process,” said Duc.

By June 10, according to the State Bank Governor Nguyen Van Giau, total loans for the property sector stood at VND222 trillion ($10.7 billion), comprising 10 per cent of the whole banking system’s total lending. The figure was VND13 trillion ($631 million) lower than the year’s beginning.

Dong A Bank general director Tran Phuong Binh said with the monetary policy continued to be tightened, banks must become more cautious about extending loans.

“Moreover, the State Bank does not encourage loans to non-production sectors, including property development,” said Binh.

Sacombank chairman Dang Van Thanh said the bank’s property loans accounted for less than 10 per cent of its total lending.

“We have to focus on manufacturing enterprises and consider property lending more carefully,” said Thanh.

Tran Quang Chat, chairman of property developer Song Hong Corporation, said it was almost impossible to borrow money from banks this year.

“We have to source financing from our strategic partners or use our own equity,” said Chat.

Duc said high lending rates were another najor barrier.

“In papers, [the highest] lending rate applicable to property companies like us is 25 per cent. But adding several kinds of fees, the real rate must be 27-28 per cent per year, an unbearable level,” he said, adding that only small abd feasible property projects could access bank loans.

Chat said an emergency exit plan for property companies was to borrow from manufacturers.

“Some manufacturing enterprises have lots of money and we prefer borrowing from them to banks,” he said.

In this scenario, almost all property developers were going through a difficult period, “especially ones without access to financing sources will collapse in the near futures,” he said.

Reported by Thu Thai | VIR

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