Can Van Luc, chief economist of the Bank for Investment and Development of Vietnam (BIDV), said there is no need for the state to use state money to ‘rescue’ the real estate market. Reasonable mechanisms, policies and reciprocal capital will help solve the problems.

Regarding the VND110 trillion credit package for social housing development, he said the government should consider a master and radical plan to develop social housing like models in Singapore and South Korea. He also mentioned the lessons learned from the previous VND30 trillion support package.

The State Bank of Vietnam (SBV) needs to grant credit growth limits this month so that credit institutions can plan their business soon.

Luc said that it is necessary to control real estate credit risks by adjusting the risk coefficients for real estate market segments. The Ministry of Construction (MOC) needs to play a major role in classifying real estate into different segments, such as social housing and resort real estate.

Meanwhile, the Ministry of Finance (MOF) needs to submit to the government a plan on amending Decree 65 on corporate bond private offerings; and join forces with MOC to release guidance on exchanging bonds for real estate, i.e. paying bond principal and interest in real estate.

Serious measures need to be taken to solve liquidity problems when bonds mature. 

“It is necessary to sell assets, and even accept high discount rates of 30-40 percent to create liquidity, ensuring the implementation of financial obligations to bond holders,” Luc said. “At the same time, procedures for bond issuance need to be prepared soon so that enterprises can issue bonds as soon as the amended decree is released."

Two solutions

Regarding bond issuance, Hoang Van Cuong, a National Asembly Deputy, Vice Rector of the National Economics University, said the most important thing is restoring investors’ confidence.

According to the expert, the government needs to apply two special solutions.

First, allow enterprises to negotiate with bond holders to convert debts into construction bonds which can then be converted into products when construction works are completed. Investors will receive real estate products depending on their contribution value.

Investors can also transfer bonds. Bond holders are considered investment capital contributors who will receive products when the construction works are completed, or a value equivalent to the convertible volumes of products.

The method is a type of mobilizing long-term capital for real estate firms, while bond buyers are capital contributors who will enjoy real estate’s added value.

Cuong said that investors of some important real estate projects may sell the projects to foreign investors if they cannot find capital.

“Many foreign investment funds are preparing capital and waiting for opportunities to take over the projects if Vietnamese developers face problems,” he said, adding that this may cause long-term consequences to the real estate market.

In this case, according to Cuong, the government needs to make direct intervention by issuing government bonds to buy corporate bonds (at lower interest rates and longer terms, so that people feel secure about the money they spent to buy corporate bonds); transfer the debts to debt management institutions such as DATC (Vietnam Debt and Asset Trading Corporation) and VAMC (Viet Nam Asset Management Company) ; and continue to control the operation of the projects until the investment capital can be taken back.

He stressed the need to avoid the criminalization of these cases, saying that enterprises should be given the chance to recover under the control of the state’s debt management agencies.

Meanwhile, the National Assembly needs to approve a solution to settle the contradictions of legal regulations; and allow the government to make prompt decisions in issuing government bonds to buy back corporate bonds in important projects.

Speculation

Le Xuan Nghia, a member of the National Advisory Board for Monetary Policies, emphasized the need to settle supply shortage and demand abundance.

“Land is a rare and precious natural resource, while houses are an essential demand. We need to build real estate policies on that platform, not let speculators collect real estate and accumulate natural resources, turning the resources into huge profits in the future,” he said.

Nguyen Le