The State Bank of Vietnam's (SBV) Circular 22, which sets a roadmap for gradually reducing credit to the real estate sector and controlling consumer credit, is expected to hinder the development of the real estate market.

However, Can Van Luc, chief economist of BIDV, commented that the circular will help drive cash flow to the market segment for those who have real accommodation demand, not block cash flow to the real estate market.

The circular stipulates that the risk ratio for the loans of less than VND1.5 billion, to be provided to fund people’s house purchases and repairs will be 50 percent, and only loans to fund real estate business will have the high risk ratio of 200 percent.

The circular stipulates that the risk ratio for the loans of less than VND1.5 billion, to be provided to fund people’s house purchases and repairs will be 50 percent, and only loans to fund real estate business will have the high risk ratio of 200 percent.

In 2018-2019, warned about the adjustment of the bank lending policy, many real estate firms began restructuring their finance activities. They tried to mobilize capital from the stock market by issuing corporate bonds or stocks rather than bank loans.

The Decree 91/2019 on administrative sanctions relating to land, which took effect on January 5, 2020, is also believed to affect the real estate market.

Nguyen Van Dinh, deputy secretary of the Vietnam Real Estate Association, commented that the decree gives stricter provisions than the old decree. It sets fine levels for nearly all violations in rural and urban areas, while the fines are heavier for all violations.

This is expectef to reduce the number of violations in land use, while investors and users will have higher responsibility for land use activities.

The noteworthy provision of the decree is that the people will be strictly punished for buying/selling land without land use right certificates, or ‘red books’. The State will take land back if people don’t put land into use after they are punished.

The adjustments of the land price frames will also affect the real estate market. The new frames will be applied from 2020 to 2024.

Under the government Decree 96/2019 on land price framework, local authorities of cities/provinces will build new price frames to be applied for five years.

Dang Hung Vo, former Deputy Minister of Natural Resources and the Environment, believes that as the local authorities raise the land prices, the house prices will decrease.

If the land prices set by the state are low, this will encourage speculation. Speculation is believed to be the reason behind the current high house prices.

Linh Ha 

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