No home loans against legally incomplete projects: central bank

The central bank is seeking feedback on its draft circular that sets stricter conditions for real estate loans as a measure to mitigate speculation and risk of a bubble burst.

If projects have not yet become legally eligible, there is a high possibility of customers and owners canceling the contract over the failure in acquiring needed permits.

This will complicate commercial banks’ management of capital and potentially pose risks to the economy, the central bank argues.

Le Hoang Chau, chairman of the Ho Chi Minh City Real Estate Association (HoREA), deemed the move "necessary", noting that loans are still allowed for projects that meet legal requirements.

"The draft not only helps protect customers’ rights and benefits, but also build a healthier real estate market," Chau said.

Tran Khanh Quang, director of property developer Viet An Hoa, estimated that around 20 percent of homebuyers pay their deposits with loans. The approval process for these loans have been tightened in recent years, he added.

Mortgage deposits usually account for 20-30 percent of the asset’s value, said the deputy director of a property developer in HCMC who did not want to be named.

Once customers are not able to pay a deposit on their own, the chances are high that they do not have a stable financial source and may result in defaulting subsequent payments. Therefore, the ban is a necessary risk reducing measure, the person said.