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VNRE - Over one quarter has passed since the State Bank of Vietnam (SBV) applied credit tightening on non-productive sectors such as real estate and securities, causing a severe shortage of funds on the property market.

Poor performance of the market is discouraging a number of businesses and is impacting the progress of many on-going projects, and thus there is a need for effective measures to remove obstacles hindering the industry.

At a meeting on Saturday held by the HCMC Real Estate Association (Horea), Le Hoang Chau, chairman of the association, mentioned difficulties which have put pressure on the market. For instance, a sharp rise in input costs and lending rates has driven many firms to the brink of bankruptcy, Chau noted.

According to Chau, the city in the first half of the year had only five projects of 1,800 units under construction, which is the lowest figure so far. Meanwhile, the outlook of the market in the second half is forecasted to remain tough for the industry.

Chau commented that relevant authorities should not group the real estate industry into a non-productive group, as the field also uses many workers and materials to build apartments as products.

Truong Thi Hoa, deputy chairwoman of the HCMC Commercial Arbitration Center, agreed with Chau. It is necessary to carefully weigh things up before listing the industry as a non-manufacturing field, she added.

It is better not to tighten credit for 70-80% of completed projects, and enterprises with a low bad debt ratio, she said.

The monetary tightening policy makes banks strict with non-productive industries, blamed for the current sluggish realty market. As a result, debtors have difficulty recovering funds to service bank loans.

A report of the HCMC authority quoted a SBV source as saying total outstanding loans in the city’s real estate sector declined to VND77,522 billion in late May from VND85,100 billion in January. However, bad debt involving the sector gradually increased to 4.06% in May from 2.47% in January.

Given less consumer spending, many investors have had to offer discount prices in the hope of recovering investment costs. Besides, dreariness and price reductions are believed to have resulted from monetary policy and dampened investor confidence.

In reality, the property market’s weak liquidity makes secondary investors reserved, while those in need of housing tend to wait for lower prices. Many secondary investors want to cut losses but could not do anything, even though the prices they offered were lower than what was offered by developers.

Several investors have delayed their sale plans while others have come up with many solutions to attract consumers, such as interest subsides, lucky draws, cash gifts or presents of gold and savings books for clients.

Appropriate policies for market regulation

Le Chi Hieu, vice chairman of Horea, suggested policies should be flexible enough to adjust and support the market, instead of burdening the market.

High land costs have pushed housing prices up, he said, and the lending rates amounting to 24% per year for a three-year project could have been significantly down if such input costs were adjusted lower. Notably, most investors find it hard to survive with the land price payment regulation, Hieu commented.

Similarly, the HCMC government also admitted shortcomings that it has yet to regulate the market.

At present, housing trading accounts for 50-60% of the whole real estate transactions, showing the imbalance in the industry.

So far, there is no professional information center collecting data, forecasting and evaluating the property market. Consequently, recommending appropriate policies to manage and supervise the market as expected is not easy.

Also, the system of finance and credit or tax still has shortcomings and instability, which need to be improved.

Specialists agreed that the Government should soon issue specific regulations on non-banking financial institutions such as real estate investment trust and housing savings funds. It is expected that these regulations could help the industry minimize dependence on banks to mobilize capital.

According to Le Xuan Nghia, vice chairman of the National Financial Supervisory Committee, authorities should have flexible monetary policy and ensure stable credit growth of the local realty market.

Reported by Dinh Dung | The Saigon Times

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