Banks, property developers trade blame for credit challenges

"We’re not asking for lower interest rates, we just want access to new loans," said Le Hoang Chau, chairman of the Ho Chi Minh City Real Estate Association, at a meeting held by the State Bank of Vietnam (SBV) Wednesday to discuss resolutions to major challenges facing the property industry.

He said this year would be an important year in determining whether some property developers would survive the struggling economy or not.

The chairman called on businesses and banks to unite now in untying the credit knot currently strangling the real estate industry.

Hung Thinh Land CEO Le Trong Khuong reiterated that businesses need more access to loans. "Bank loans will pump up capital for businesses to use in developing and investing. The bond investors [we’ve been using] are concerned whether or not we can sell more products or survive at all."

Pham Thieu Hoa, chairman of Vinhomes, proposed a streamlined mechanism to determine property developers’ reasons for borrowing. Hoa said some property firms apply for loans bank ostensibly to help their real estate business, but then they actually end up covertly using the money to invest in stocks or shares in other fields.

A representative of Novaland said that banks need policies to restructure and delay debt payments for property developers.

Banks, however, saw things differently. Outstanding loans on property last year rose 24% from 2021, one of the highest growth rates among all sectors of the Vietnamese economy.

Property accounted for 21.2% of total credit, the highest figure in the last five years. These figures show that the capital bottlenecks facing property developers are not caused by banks, said Nguyen Quoc Hung, general secretary of the Vietnam Banks Association.

Hung argued that the statistics proved that lenders have not tightened credit access for the real estate industry at all.

Military Bank CEO Luu Trung Thai said his bank still employs quotas for property loans, and their interest rates are reasonable.
The problem therefore lies in the property industry itself, he said. Although demand for property is high in places like Ho Chi Minh City, 80% of supply belongs to the high-end segment, which most people cannot afford, Thai said.

He added that property developers have been relying on bonds for access easy credit, but they’ve failed to create proper backup plans.

State-owned lender Vietcombank saw property credit rise 17% last year, higher than average, said CEO Nguyen Thanh Tung.

Nguyen Hoang Dung, deputy director of VietinBank, said the property and banking sectors are "in the same boat," and if the former has trouble, the latter would also be affected.

He added that banks have always provided favorable credit policies and conditions to property businesses.
But Chau from HoREA still argued that banks need to at least relax loan application paperwork requirements for property developers.

However, lenders rejected the proposal. "Property companies might not need to show construction permit when we examine their loan proposal, but when it comes to disbursing money we cannot approve a loan without this document," said Thai.

He estimated that legal challenges account for 70% of property developers’ difficulties, and added that the current procedures for loan applications must remain in place and be followed strictly.

Other bank leaders said lenders are currently relying mostly on short-term deposits from customers, but property developers need medium- or long-term loans, which therefore makes it risky for banks to lend to real estate businesses.

Dung from VietinBank said the property sector should not receive preferential policies on delayed loan repayments, otherwise transparency would be jeopardized.

He argued that property developers should sell off their own assets to ensure financial security.

SBV Governor Nguyen Thi Hong said property developers need to draft more reasonable and focused development plans to reduce risks.

She said that some real estate companies are trying implausibly to develop 50 projects at once, which is a major challenge to their success during this difficult economic era.