Insiders urge policy reforms to thaw property sector

Prime Minister Pham Minh Chinh is set to chair a meeting Friday to tackle issues in the property market with representatives from government bodies, property developers and banks.

It is expected that the meeting will address the two biggest challenges in the sector: the lack of credit access and legal problems.

Since mid-2022, property developers began to have more difficulty accessing loans as lenders said they had exceeded their credit quotas. Customers were also not given loans, which dampened sales.

Developers fell into trouble, with the number of property developers filing for bankruptcy rising 40% last year, according to the Ministry of Construction.

Novaland, one of the biggest developers, recently stopped giving its customers loan interest incentives as it had cash shortages.

The Dat Xanh Group had to cut 2,700 staff, while other companies had to reduce worker salaries due to falling demand.

The problems were exacerbated by administrative procedual issues, which Le Hoang Chau, chairman of the Ho Chi Minh City Real Estate Association, (HoREA) estimated accounted for 70% of the difficulties that property developers face.

A prime ministerial task force discovered that there are many problems in the process of approving property projects in all key phases: evaluation, planning, investment and bidding.

Policies which were issued to encourage building social housing and affordable projects did not have a practical impact. Government bodies were afraid of making mistakes and so they delayed giving permits and approving requests, the task force said in a report.

To resolve these issues, property developers have called on the State Bank of Vietnam (SBV) to increase credit quotas, allow debt restructuring and payment delays, and to approve new loans for both developers and buyers.

HoREA suggested that the government use state coffers to partly pay for first-time homebuyers’ loan interest, provided that the apartment is priced under VND1.8 billion.

The Ministry of Construction recently said it was looking into a plan to give banks VND110 trillion to fund social housing projects.

It also said that property developers should "save themselves" by selling some of their products to focus on key projects.

But there seems to be a discrepancy in looking at the problems from the perspectives of developers and banks. Although developers have claimed that accessing loans is difficult, bank representatives in a recent meeting affirmed that they now have cash to loan.

Luu Trung Thai, CEO of lender MB, said that banks want to help property developers but they cannot approve loans if necessary permits have not been attained.

Property developers have been advised to sell their assets to increase cash, but some say that this is not ideal.

Financial expert Dao Phuc Tuong said that as 70% of developers use their own property as collateral for loans, and that selling them will only reduce their chances of accessing more credit.

"Banks might ask developers to give more collateral, but developers might have difficulties in providing that," said Tuong.

Some experts have called on the government to step in and simplify administrative procedures.

Property analyst Tran Du Lich said that the government needs to review all regulations and make necessary systemic changes. Authorities can start untying knots at certain projects to create legal grounds for the same problems at other localities to be resolved.

Le Hoang Chau said: "The ultimate goal should be to complete making amendments to land and property laws."

He also proposed that properties which have been used as collateral for bad debt be allowed to be transferred to another developer so that projects that have been stalled by incapable developers can be revived.