The State Bank of Vietnam (SBV) Governor Nguyen Thi Hong said a credit package worth VND120 trillion would be launched, which would offer loans to both real estate developers and home buyers at preferential interest rates 1.5-2 percent lower than average commercial interest rates.

Hong said that real estate loans usually have relatively high growth rates. In 2022, while all loans grew by 14.17 percent, real estate credit grew by 24.2 percent. Real estate accounted for 21.6 percent of total outstanding loans to the economy (VND2.58 quadrillion).

Of these, more than 60 percent funded the purchases of homes, mostly high-end products, while over 30 percent was disbursed for real estate trade.

“As Can Van Luc (chief economist of BIDV – reporter) said, of the total capital for the real estate sector in 2022, 70 percent was bank loans, while the capital from other channels accounted for 30 percent,” Hong said, adding that it is necessary to assess the situation to figure out reasonable solutions.

In principle, issuing corporate bonds is an effective capital mobilization channel that helps ease reliance on bank loans, but it is facing difficulties. Meanwhile, 80 percent of bank capital is short term capital.

In the last months of 2022, especially since October when the SCB scandal occurred, commercial banks had to pay attention to ensure liquidity, so they had to restructure capital to provide real estate credit. Meanwhile, loans to the real estate sector are mostly big long-term ones.

“As enterprises could not prove the legal status of their projects, credit institutions could not provide loans,” Hong said, citing a report that said 70 percent of real estate projects have legal problems.

If projects don’t have sufficient legal status and the land price cannot be defined, developers need to prove the feasibility of their projects and their solvency.

Hong said that affordable and social housing products are seriously lacking. A report from the Ministry of Construction (MOC) showed that in 2022, Vietnam had 682 projects with 301,967 apartments. There were 150 social housing projects with 19,967 apartments. It is necessary to find ways to increase the supply of products in this market segment, thus attracting capital to the real estate market.

“I have directed credit institutions to continue to reserve capital for real estate projects with legal status that satisfy the demand for accommodations at a lower interest rate,” Hong said.

“Our view is that in order to develop the real estate market sustainably, real estate projects should target the majority of people, especially those who have real demand for accommodation. It is necessary to restrict speculation and price inflation,” she added.

Regarding the credit growth rate, the targeted rate is 14-15 percent for 2023, which is higher than the 14.17 percent of last year. SBV will not set a limit on real estate credit.

VND120 trillion credit package

Hong said that SBV reached an agreement with four state banks on the launch of a preferential credit package of VND120 trillion for the real estate market.

Regarding the MOC-initiated credit package of VND110 trillion for social housing development, SBV said it is necessary to consider capital sources. Long-term money supply may affect flexibility in the monetary policy.

Regarding lending interest rates, Hong said SBV would ask credit institutions to cut operation costs to force interest rates down.

Concerning proposal on debt payment extension, MOC needs to check projects to find out which are for speculation purposes, which serve production and business, trade and service. Specific treatment and solutions will be applied to every type of projects.

“We will continue to ask credit institutions to work with enterprises to remove difficulties for the real estate market,” Hong said.

Hong Khanh