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Banks play it safe with property loans
Some commercial banks have regained enough confidence to offer property loans as the credit crunch eases but both sides of the deal are being more selective and cautious.
Loans would be directed to people in need of homes, instead of property investors, and to profitable real estate projects at prime locations in big cities, according to several banks.
However, high borrowing costs, cautious spending amid inflation and shrinking demand have been enough to keep many potential borrowers away.
Commercial banks cut lending, especially real estate and stock loans, in February when the government tightened monetary policy to fight high inflation. The move has helped cool the property bubble, which grew last year in part due to easy bank loans.
Banks’ total outstanding property loans at the end of September amounted to VND115 trillion (US$6.9 billion), accounting for 9.15 percent of total lending, the central bank said earlier this month.
As their liquidity has improved, some banks have reopened their doors to lenders wanting to buy real estate. They have also partnered with developers whose housing projects they deem feasible and highly profitable.
Asia Commercial Bank (ACB) last month announced it would use part of a VND2 trillion loan package for property loans and extend the loan term to 10 years from 3 years.
Vietcombank offers property loans at a monthly cost of up to 1.6 percent to be paid off over 15 years.
HSBC and the Mekong Delta Housing Development Bank, meanwhile, have partnered with developer Phu My Hung (PMH) to provide loans for buyers of apartments in PMH’s Sky Garden 3 project in Ho Chi Minh City’s District 7.
Similar partnerships in HCMC include that of VIB Bank and Inveskia, the developer of the Blooming Park apartments, as well as the cooperation between Bank for Investment and Development of Vietnam and Keppel Land, a Singaporean developer building the Estella apartments in District 2.
However, property loans have not been able to attract many customers even though property prices have reduced significantly after peaking at the beginning of this year, according to bank representatives.
Ron Logan, HSBC’s head of personal financial services in Vietnam, said high interest rates had been preventing many people from taking out property loans.
Current common annual interest rates are 19-20 percent for property loans.
A home buyer thus had to pay on average more than VND13 million per month for a three-year-term VND300 million loan (US$18,000).
It was not easy to find customers who could pay that amount, bankers admitted. The country’s annual per capita income is still below $1,000 while that in Ho Chi Minh City – the country’s business hub – was just $2,100 last year.
Bui Tan Tai, deputy general director of ACB, said many people had decided against taking out loans due to the troubled global economy.
As banks have reduced deposit interest rates, many people are also waiting for the lending rates to go down, he added.
A “reasonable” borrowing cost would be between 14-15 percent annually, Tai said.
But banks are being very cautious. ACB said it would not loan to customers who want to buy land in newly-developed urban areas since construction in such areas could be delayed due to high material costs.
Similarly, most other banks have said they would only loan to those with real housing needs and are turning down those aiming to invest in the property trade.
Huynh Song Hao, deputy director of Vietcombank’s HCMC branch, said banks “won’t loan to those who buy land and leave it there [while waiting for prices to go up].”
Logan said HSBC preferred to provide loans to those buying finished homes instead of those that were still under construction.
The deputy director of a commercial bank in HCMC who requested anonymity said banks have been made all the more “reluctant” to take real estate mortgages as property prices “are over-inflated and have yet to return to their real value.”
Hao said that so long as the government’s tightened credit policy was still in place, commercial banks would continue to “focus on loans for production.”
Thanhnien
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