Van Xuan Real Estate Group in HCM City expected a VND2 trillion loan after the bank approved a loan. However, in the last minute, lending was canceled. The bank said it could not provide the loan as its credit quota was running out. It saw real estate credit increasing sharply in the first and second quarters, so it had to tighten lending in the third quarter. The failure to borrow capital has upset Van Xuan’s business plans.

The story was related by Nguyen Minh Nhut, deputy CEO of Van Xuan Real Estate Group, at a recent workshop discussing solutions for the real estate market to seek capital. He said that many realtors now feel secure after hearing information about the tightening of lending to the real estate sector.

“Some commercial banks have stopped disbursement for clients who buy real estate products to take shape in the future,” Nhut said. “Leaders of the State Bank of Vietnam (SBV) and some commercial banks affirm that they are still providing loans as usual, but businesses find it ‘unusual’.”

According to Nguyen Van Hau from the HCM City Bar Association, many real estate developers cannot access bank loans even though they have good projects and well-prepared documents.

If real estate developers cannot access loans, project implementation will go slowly and clients buying apartments to take shape in the future will suffer. Because of the lack of capital, the execution of construction projects stops, and steel does not sell well. 

As a result, real estate prices will escalate. Since projects remain uncompleted, liquidity in the real estate market drops and bad debt increases, which affects economic recovery.

Chair of the HCM City Real Estate Association Le Hoang Chau said that realtors need financial and credit solutions. If they cannot access capital sources, they will be “choked to death” because capital plays a very important role in real estate project development.

He said that real estate firms find it very difficult to access bank loans, though the central bank said it doesn’t intend to tighten lending to the real estate sector, but it just controls capital flow to the sector.

Bankers say ‘we are still providing as usual’

While businesses complain that bank loans are inaccessible, bankers affirm that they still keep providing loans.

VietinBank’s deputy CEO Nguyen Dinh Vinh said the real estate loans of the bank have increased by 24 percent compared with the beginning of the year, while real estate loans account for 20 percent of total loans and the bad debt ratio is very small, just 0.3 percent.

Vinh affirmed that the State Bank of Vietnam (SBV) doesn’t have any document that says banks have to tighten lending or restrict credit. VietinBank will still provide loans, prioritizing real estate projects developed by prestigious investors.

Tran Phuong, deputy CEO of the Bank for Investment and Development of Vietnam (BIDV), said the bank’s credit had grown by 6.51 percent as of the end of May 31. Home loans still grew by 3.9 percent, which means that there was no restriction in lending.

According to the Vietnam Banking Association, the housing prices have been pushed up which makes it difficult for banks to appraise loans. It would be safe to lend up to 50% of the value of housing products priced at VND100 million/sq m. But it would be risky to do this if the prices are sky high, at VND300 million/ sq m.

SBV Deputy Governor Dao Minh Tu confirmed that the central bank has not released any document that instructs banks to tighten credit to the real estate sector. The agency only requests banks to control their investments in risky fields, large-scale projects.

SBV still encourages commercial banks to continue providing credit to the projects that can prove their feasibility. It doesn’t make intervention in banks’ operation and it is commercial banks which decide whether to provide loans.

The total outstanding loans to the real estate sector are VND2,288,278 billion and the real estate credit growth rate is 10.19 percent. Up to 94 percent of real estate loans are medium- and long-term loans, according to a report to the National Assembly.Tran Chung