Agribank Trang An branch has announced the auction of two villas at Ciputra urban area in Hanoi which are the properties of Chu Van An, who mortgaged the villas for bank loans.

The total starting price of the two villas is VND270 billion, or VND30 million lower than that set for the auction in August.

The first asset is Villa No29 in Q-M3 Block with the starting price of VND185 billion, not including VAT, or VND462 million per sq m. The price is VND20 billion lower than that set for the auction held one month ago.

The second asset is Villa No  9 in T6 Block, 230 sq m. The starting price is VND84 billion, or VND365 million per sq m, VND9 billion lower than the price for the August auction.

Meanwhile, in the real estate market, villas and townhouses in Ciputra urban area are traded at VND250-350 million per sqm.

Sacombank last month announced the sale of products at Xi Grand Court at No 256-258 Ly Thuong Kiet street in district 10, HCM City, including 10 penthouses and nine apartments.

The bank once put the properties into auction four years ago with starting prices for the 19 apartments at VND3.2-9.8 billion. After four years, the properties are being offered at prices lower by VND2 billion.

A state-owned bank has recently slashed the price of a 160 sq m house in the Old Quarter by half to VND50 billion.

Over the last year, many commercial banks have tried to liquidate land, real estate projects and hotels used as collateral valued from tens of billion dong to trillions of dong. But this was very difficult.

Prices remain high 

According to Nguyen Van Dinh, a real estate law expert, real estate which commercial banks accept as collateral for loans all have full legal status.

He said that commercial banks strictly follow procedures when signing contracts on mortgaging assets for loans and credit contracts.

Mortgage contracts are notarized and authenticated in accordance with current laws and they must be registered for secured transactions at the National Registration Office for Secured Transactions. The land-use right certificates (red books) of the properties must be kept by commercial banks (lenders) and any change in the properties’ ownership must be registered at the Land Registration Office. 

After the properties were mortgaged, the database system clearly showed that the properties were being mortgaged at banks, so that all parties (including notary offices) knew that the properties were being mortgaged. The properties won’t be sold to other parties or used for wrong purposes.

Also according to Dinh, Article No297 of the Civil Code stipulates that if property owners deliberately sell the properties which are being mortgaged, banks (which hold the mortgaged assets) are entitled to claim the properties back from borrowers.

So, the legal status is not the reason behind the difficulties in selling mortgaged real estate.

Dinh Trong Thinh, an economist, thinks real estate offered to sell by banks is not attractive to buyers because the prices are too high.

“Many real estate items were overvalued at the moment when banks provided loans. Though banks have slashed selling prices of collateral items, they remain too expensive,” Thinh commented. 

In addition, the real estate used as collateral for loans are mostly valuable, priced at tens or hundreds of billions of dong, so banks find it difficult to find buyers who must have powerful financial capability.

The other reason that makes collateral unattractive is that Vietnamese tend to avoid assets belonging to defendants in criminal cases, or assets belonging to owners who have incurred big losses or have had poor business performance.

In general, when seeking to buy foreclosed assets, buyers need to consider the valuation of assets and learn about the reasons behind the foreclosure. They also need to financially prepare for the deals by calculating the amount of money they have to pay and the capital costs. 

When they buy resorts, hotels and houses, investors also need to consider what is left of the land leasing duration. If the land leasing time is short, properties won’t be valuable despite low prices.

Hong Khanh