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After bank loans, property firms seek alternative sources of capital
Property companies struggling with capital inflow may turn to banks for relief, but they should also co-operate with other property firms or sectors to generate needed funds, according to property experts.
Nguyen Tran Nam, the deputy minister of construction and chairman of the Viet Nam Real Estate Association, said the Government’s current policy was to continue granting loans for property projects, particularly for residential houses, offices and infrastructure facilities at industrial parks.
However, the current ceiling interest rate for bank loans is a high 21 per cent, an increase over the rate of 17 per cent a year in 2007.
Vo Dinh Quoc, general director of An Binh Real Estate Investment JSC (An Binh Land) said that now banks are offering loans through investment funds and foreign credit organisations with strict repayment conditions.
Real estate investment companies were having difficulties with capital, so banks were struggling to find funds for the ventures, he said.
Nam suggested that domestic property investors merge in order to mobilise capital from all sources, share profits and limit risks to meet initial and long-term financial demands.
He said that the difficulties were temporary, but Vietnamese property enterprises should still find ways to improve competitiveness.
Pham Sy Liem, deputy chairman of the Viet Nam Construction Association, said that Vietnamese property enterprises have developed on a small scale. They have often mobilised capital from customers while getting loans from banks for site clearance and project establishment.
Liem suggested that they should co-operate to set up joint stock companies to more strictly manage the issuance of bonds and to maximise capital from the stock market.
He said, then, that joint stock companies could develop into large property groups with capital in the hundreds of millions or billions of dollars, which could compete with foreign property enterprises.
Property developers should not wait on banks, said Dinh The Hien, director of the Institute for Applied Informatics and Economic Research (IAIER).
Setting up co-operative ties with ministries and sectors would help diversify investment sources, he said.
Property investment companies, property investment funds and property mortgage funds were all potential capital sources, he added.
Hien said that the Government and other industries should estimate the market’s demand for property, particularly offices, trade centres and hotels, for next year and then calculate the amount of needed capital.
Based on that calculation, local banks should then draw up credit plans for property projects, he said.
Low loans
In recent months, the number of bank loans granted for property projects fell significantly nationwide, particularly in Ha Noi and HCM City.
In HCM City alone, bank loans for property projects from April to late July fell by VND3.7 trillion (US$231 million) compared with the first quarter. A similar drop occurred in Ha Noi.
Banks are hesitant to issue loans now, as their concern is focused on collecting on already existing outstanding debts.
The State Bank of Viet Nam (SBV) said that loans for the real estate sector reached VND135 trillion ($8.18 billion) in April, accounting for 10.8 per cent of total outstanding loans in the banking system. The rate was 9.96 per cent by the end of June.
Banks have collected on few loans from property projects because many owners default on loans before project completion.
Tran Xuan Huy, general director of Sai Gon Thuong Tin Joint Stock Commercial Bank (Sacombank) said that since the Government tightened the credit policy, as of June 30 bank property loans accounted for only 3 per cent of its total outstanding loans at VND38.33 trillion ($2.32 billion).
By the end of June, Eastern Asia Commercial Bank’s (EAB) property loans accounted for 10 per cent of the bank’s total outstanding loans of VND24.67 trillion ($1.5 billion), EAB said.
In addition to having difficulties accessing loans, the prices of basic building materials, including cement, steel and bricks, have now increased by 20-30 per cent over the same period last year, Nam said.
So owners of many real estate projects had extended the building period, delayed or temporarily stopped projects, he said.
VNS
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