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Overcoming housing shortfall to cost $130 billion over the next 10 years
The nation is facing an estimated shortfall of 1.3 billion square metre of housing between now and 2020 and will require US$130 billion to overcome it, according to the Ministry of Construction.
The market gobbles up VND160 trillion ($8.4 billion) in capital every year to build 100 million square metre on new housing, the ministry said.
The State budget provides VND150-200 billion ($8.1-10.4 million) of this figure each year, while commercial banks finance the lion's share, providing a whopping VND150 trillion ($8.1 billion).
Tran Kim Chung from the Central Institute for Economic Management said banks played the decisive role in providing capital for real estate development, since most developers are firms with a charter capital of VND6 billion ($324,000) or less each.
Outstanding debt in the real estate development sector has therefore increased from VND55 trillion ($2.9 billion) in 2007 to VND150 trillion ($8.1 billion) last year, accounting for over 10 per cent of all outstanding bank loans, the maximum amount allowed by law.
With these statutory limits, banks would be unable to meet the medium-and long-term capital needs of the market, said the Deputy Head of the Ministry of Finance's Market and Price Research Institute, Vu Dinh Anh.
"The primary source of capital for the market has been limited by credit regulations," Anh said.
While significant capital from foreign investment - both direct and indirect - has fcoused on real estate development in the fields of tourism, office space, high-end apartments and other commercial projects, this "cannot be classified as a stable development trend," he said.
With corporate bond issues still in an embryonic stage in Viet Nam, "a legal framework for raising capital from individuals is needed," he added.
Other experts have also called for other methods of diversifying capital sources, including the establishment of investment funds and a more creative use of securities markets. HCM City Securities Company General Director Johan Nyvene agreed that businesses should tap into capital by listing on the stock market.
"The establishment of real estate development funds and creating associations with financial market are important," he said.
"Mergers and acquisitions among companies should also be promoted to enlarge capital for the market," Chung suggested.
"Liquidity could be ensured as real estate values increase," said Pham Thanh Hung, Director of the Century Real Estate Group (CENGROUP), proposing the application of fixed interest rates for real estate borrowers to avoid risks due to falling prices. Chung also called on companies to clarify their demands and map out capital plans at different stages of their projects in order to contribute to stable market growth.
Vu Hoa
vietnamnews
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