Land investors face desperate struggle to repay loans

Two years ago, Trung borrowed money from banks to buy three pieces of lands in Bac Giang Province for around VND2 billion (US$84,746) each.

Within a month, their prices zoomed to VND2.5-2.6 billion on rumors an industrial park was set to be built in their vicinity, but he did not sell them and waited instead for even higher prices.

But the land fever in the north cooled down, and since mid-2022 no one has inquired about his lands though he offered them for sale VND500-600 million below cost.

Trung has to pay principal and interest of nearly VND60 million (US$2,540) a month, and his loans are likely to turn bad in the near future. He finally decided to sell a townhouse in the province’s Bac Giang City.

Another Hanoian, Lam, bought two plots of land in Hoa Binh Province’s Cao Phong District in mid-2022 at VND16 million per square meter when the property market was still booming. He said he tried to sell them at half-price but still found no buyers.

He has also been trying to sell at 50% discount a plot of land he bought in early 2022 in northern Yen Bai Province.

Struggling to repay the loan he took and interest on it, he recently pledge the land ownership certificates to borrow money from loan sharks.

Quang, the director of a property brokerage in Yen Bai, said many investors have recently had to mortgage assets such as houses and cars to repay bank loans.

"It is painful to sell townhouses in downtown areas to keep plots of land in remote ones. However, only real estate that can be used for living or to do business can be sold."

The Vietnam Association of Realtors’ first quarter report said the real estate absorption rate in the northern midland and mountainous regions dropped by 80% year-on-year.

Cash-strapped investors had to accept losses of 10-30%, even 50%, as liquidity fell.

The association’s vice chairman, Nguyen Chi Thanh, said: "A profit of 10-15% was good enough for investors to sell out, but many people had too high expectations like doubling or tripling profits in a short period of time. When the market lost liquidity, they realized they risked defaulting on debts, but it was too late."

He said even selling out at a loss of more than 50% is acceptable since it takes a very long time, even half a decade, for a new price cycle to begin in provinces, especially in the case of projects with legal problems.