Real estate companies thirsty for capital

Van Xuan Group, a HCMC-based housing developer, obtained a VND2 trillion ($86.3 million) loan for developing a new project.

But the bank halted disbursement soon after construction began, saying its lending limit had run out, group Director Nguyen Minh Nhat told a conference Tuesday.

In Vietnam, there are four channels for property developers to mobilize capital: crowdfunding, stocks and bonds, investment funds and loans.

But there are complications in accessing them, Nhat said.

Investment from foreign funds has slowed over lengthy procedures, while recent crackdowns on real estate companies over securities and bond violations have scared investors from the market.

In April, for example, property developer bond issuances came to a complete halt following the government asking the central bank to monitor them closely.

Vo Thi Hong Mai, deputy director of real estate company Asian Holding, said housing market liquidity has been low since the Covid-19 pandemic struck two years ago.

News about the tightening of real estate loans by commercial banks has discouraged prospective homeowners, who tend to borrow 20-30 percent of a housing unit’s price, she said.

"I wish the banking industry would address the difficulties in lending to developers and customers so that the market could recover by the end of this year," Mai added.

Le Hoang Chau, chairman of HCMC Real Estate Association, said many real estate companies badly need capital because they are not able to get loans from commercial banks.

It has become much harder for developers and buyers to obtain loans from banks in the past two months following the State Bank of Vietnam (SBV) instructing commercial banks to limit loans for potentially risky purposes like trading stock and real estate development, he noted.

"Capital is the backbone of the economy, the lifeblood and ‘oxygen tank’ for the real estate market. Without gaining access to it, businesses are suffocating."

In response, SBV Deputy Governor Dao Minh Tu said the central bank did not direct the tightening of real estate loans.

It has only engaged in risk management of lending to developers for speculation and market manipulation, and there was no lending limit for companies with highly feasible projects.

Commercial banks decide whether to approve a loan or not, Tu said.

He added it was necessary for Vietnam to mitigate bad debt risks to avoid a systemic crash, a lesson learnt from the bursting of real estate bubbles.

Therefore, the SBV’s tightening of risk management will only ensure financial stability and create a more equal environment for all businesses, he added.