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VNRE The Vietnam real estate market raised its hopes when the State Bank recently introduced a procedure for credit organizations to eliminate 4 groups of demand for capital in the real estate field from the non-production credit proportion. However, this can be only considered a “technique trick”; the State Bank can hardly loosen financing for real estate during this period.


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The announcement to eliminate 4 groups of demand for capital in real estate from the non-production credit list stood out in Dispatch 8844 by the State Bank, guiding credit organizations and foreign bank branches on implementation of orientation and new credit regulations in the two last months.

The State Bank demanded credit organizations continue implementing management measures on lending activities for the non-production sector, but excluded some demands for capital serving people’s necessary demands and under governmental social welfare policies. Those with demand for capital to mend and buy residential houses and payment from salary will be considered. The following objects will also be eliminated from non-production credit: enterprises building houses for sale, rent for people with low income, workers in industrial zones, export processing zones, economic parks; building houses for workers in industrial zones but not collecting rent leasing fees, or collecting fees which don’t exceed the rate regulated by the Provincial People’s Committee based on reasonable building or leasing fee compared with the production price under corporate income tax calculation; Projects and works developing houses in progress to be handed over and put into operation before January 1st 2012 according to contract’s contents in construction activities between investors and contractors, property purchasing contract, house purchasing contract, property leasing contract.

Under this guideline of State Bank, credit is loosened to some objects, especially to low-income apartment projects and those in progress and to be handed over. Many enterprises expected that they would be financed more to continue their uncompleted projects, and quickly launch into the market to gain back capital. After a long time of financing real estate projects, banks suddenly tightened credit upon the State bank request, observing Government Resolution 11 to reduce the proportion of loans for non-production in the total debit balance to lower than 22 percent. By the end of December 31st 2012, this proportion is only 16 percent. This sudden move left the real estate market coasting and caused difficulties for numerous enterprises depending on loans to implement projects. Commercial banks didn’t give new loans and concentrated on calling back debts to push their real estate debit balance proportion to the rate required by the State Bank. The real estate market has awaited this news for a long time so enterprises can access bank loans to implement social welfare projects and uncompleted ones. This State Bank instruction not only lights up hope for enterprises, but also “opens the door” for banks to reduce their non-production debit balance norm to 16 percent in total debit balance. The December 31st deadline is coming up and many banks still have high non-production credit and are not likely to meet the requirement. Elimination of in-progress projects from the non-production list gives commercial banks a bit more room for reducing their non-production debit balance to 16 percent by the end of the year, even in the context of a frozen real estate market with low liquidation. Enterprises and commercial banks will avoid this by adjusting signed contracts between investors and contractors, buyers, etc.

 While banks are still trying to reduce non-production credit to 16 percent, enterprises can hardly borrow new credits, although they are under consideration for making loan under the State Bank’s new instruction.

In addition, in Dispatch 8844 orienting and guiding credit in the two last month, there are many notable, but not new, contents that credit organizations have to meet requirements on credit capital with reasonable interest rate, consider the ability to mobilize capital of credit organizations, suitability to governmental regulations and instructions; credit organizations allocate capital to timely meet demand for credit loan for agriculture and rural sectors, especially for farmers in winter-spring crop, export, supporting industries and lending small and medium working capital; credit expansion for these sectors will not make credit growth of the whole year exceed 20 percent, otherwise State Bank will be reported to consider.

Reported by Le Minh | VCCI

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