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Real estate investors seek capital from alternate sources
A lack of capital proves to be the biggest problem for real estate developers, especially because banks have scaled back real estate credit.
Nguyen Tran Nam, Deputy Minister of Construction, said that in Vietnam, bank loans still play the most important role in funding real estate projects. This single source of capital simply cannot meet the needs of the rapidly developing real estate market.
Statistics showed that by December 31, 2009, the total outstanding loans that are funding real estate projects had reached 218 trillion dong, accounting for 11 percent of the total outstanding loans of the entire banking system. This means that the capital proportion sourced from banks has exceeded the allowed level (10 percent at maximum). Meanwhile it is expected that by 2020, Vietnam will need some $130 billion dong worth of capital to develop real estate projects, or $10 billion (190 trillion dong) a year. Real estate developers should not expect much from bank loans.
In order to arrange capital for the real estate market, Dr. Dang Hung Vo, former Deputy Minister of the Natural Resources and the Environment has suggested to mobilize idle capital from the public, or ‘borrow money from people and pay in houses’.
However, Vo warned that this method of capital mobilization has latent risks and in order to manage the risks the real estate market needs a perfect legal framework. “Only when the risks are minimized and managed by a legal framework will this method of capital mobilization be able to bring stable capital to the real estate market,” Vo said.
Meanwhile, Dr. Tran Kim Chung from the Central Institute of Economic Management CIEM thinks that real estate developers should seek capital in the stock market by listing shares on the stock exchange
According to Chung, one of the effective measures to seek capital for the real estate market is to form up real estate investment funds. Only when the real estate market has the access to finance funds, will Vietnam have a functioning real estate market, and this will be the new development stage of the market.
Johan Nyvene, General Director of HCM City Securities Company HSC, also suggested that real estate developers should think of changing from operating as private enterprises into joint stock companies, which allows them to list shares and mobilize capital from the stock market.
In fact, this method has been applied by many real estate companies. Most recently, Ninh Van Bay Tourism Real Estate Company NVT and VInaconex-ITC have listed their shares on the stock exchange.
Currently, short term capital is considered too risky for the real estate. However, Dr Vu DInh Anh, Deputy Head of the Price and Market Research Institute said that it is not advisable to stop the short term capital to flow into the real estate market just because of its risks. The thing that needs to be done is to take full advantage of the available capital and minimize its risks.
In fact, real estate developers have had many ‘initiatives’ to mobilize capital from the public when they need it. Sacomreal, for example, mobilized capital by issuing corporate bonds. The company has been successful with issuing bonds to raise capital for three projects Phu Loi 1, Phu Loi 2 and Belleza.
vietnamnet, Dau tu
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