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Real estate credit growing slowly
Contrary to warnings about a “real estate bubble” that market experts forecast for the time when banks injected more and more money in real estate, real estate credit has been growing very slowly.
As predicted, lending interest rates have been falling, while real estate developers have launched more and more products on the market. To the surprise of many, however, real estate credit growth has been very slow.
According to Nguyen Hoang Minh, Deputy Director of the HCM City Branch of the State Bank of Vietnam (SBV), by June 30, 2010, outstanding loans for real estate purchases, repairs and project development in the city had reached 91,302 billion dong, an increase of 16.7 percent over the beginning of 2010.
“The real estate credit growth rate is not very high if compared to the same period of last year, partially because lending interest rates are still high,” Minh commented.
Providing loans to fund apartment, house and land purchases on installment is considered an attractive business for banks. Many commercial banks have been offering new products, with preferences and loosened credit conditions.
Yet, according to Dam The Thai, Personal Banking Director of ABBank, though real estate credit has increased over the beginning of 2010, the market is not bustling. In general, clients are still waiting for lending interest rates to decrease further.
Tran Son Nam, General Director of Trust Bank, remarked that his bank has launched a program, “Vinh Phuc Houses”. Under the program, owners with land who want to build houses can borrow up to 70 percent of construction expenses. The lending interest rate is less than 10 percent per annum.
In return, clients must have saving books at the bank and gradually put more money into their saving accounts. The required initial sum of money is not big, just 500,000 dong, and clients must deposit more money until they have 30 percent of the value of the buildings they want to construct or purchase. Also, clients who borrow money under the program must use construction materials provided by Vinh Phuc Company.
Bui Tan Tai, Deputy General Director of Asia Commercial Bank (ACB), agreed that outstanding loans for homes through installment plans have been rising slowly if compared with the same period of 2009. Clients are not ready to access bank loans to purchase apartments and houses on installment. Meanwhile, ACB has adjusted its lending interest rate to come in accordance with market rates.
Besides loans for mortgaged assets, ACB is now providing loans without asking for collateral. A 300 million dong loan can be disbursed within 48 hours. Despite such attractive terms, clients are still avoiding loans, primarily because they want interest rates and real estate prices to decrease further.
Currently, big banks are lending at 15-16 percent per annum, while smaller banks at 16-18 percent per annum.
Le Chi Si, Strategic Director of Thu Duc Housing Development Company, revealed that an apartment is now worth 800 million -1 billion dong, rates that are too high for most people. Meanwhile, bank interest rates are relatively steep. ACB is offering 16.5 percent, Eximbank 16.56 percent, while Vietcombank 15.55 percent per year.
vietnamnet, Dau tu
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