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Strict lending policies hamper contractors
Housing developers are struggling to cope with banks' tightened lending policies.
The new regulations in tandem with construction materials' rising prices is making it difficult for developers to survive as the real estate market continues to chill for the second straight quarter.
A leader of the Viet Nam Construction and Export-Import Corporation (Vinaconex) said an increase in construction materials' prices, along with banks' restricted lending policies, had made construction companies broke, forcing them to liquidate.
Construction materials' prices increased by 30 to 40 per cent during the past few months while a new chill in the property market caused bidders to abandon their projects after their proposals concerning the adjustment of construction materials' prices were refused by houseowners.
The procedures for State funded construction projects, concerning price adjustments, takes a long time, making the supply of housing projects lag behind schedule which in turn adversely impacts the real estate market.
The prices of construction materials including steel, cement and housing equipment continue to soar.
Construction materials account for 40 to 70 per cent of the total estimated capital for building projects, according to the Institute of Construction Economics.
Property markets primarily depend on monetary and credit policies, according to a Ministry of Construction report that was submitted to the Government Office.
Banks began increasing lending interest rates and applying greater restrictions on mortgage loans starting in July, following a warning from the State Bank of Viet Nam (SBV) that urged financial institutions to be prudent with issuing loans for real estate projects.
The warning was issued in response to findings that real estate loans accounted for more than 5 per cent of the bad debts that had incurred at several commercial banks in the country.
The SBV reduced the short-term deposit proportion reserved for long-term loans from 40 per cent to 30 per cent and specified real estate loans as high risk.
Vinaconex Deputy Director Nguyen Dinh Thiet said commercial banks only lent loans for up to 10 years, and total outstanding real estate loans were restrained to 10 per cent.
Commercial loans provide the primary impetus for the property market, reports the Collier International Company. Buyers are hesitating to borrow money from banks to purchase homes, while banks increased their interest rates that range from 17.5 to 18 per cent per year.
Investors have begun to secure capital from other sources including mobilising cash from secondary investors and issuing bonds. Secondary investors are not so interested in investing in housing projects, as the chill in the real estate market continues.
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