The VND30 trillion ($1.4 billion) bailout package to support the real estate market has achieved little progress against the ambitious targets set at its launching.

After nearly two years of implementation, the $1.4 billion property-oriented bailout package could only disburse more than 16 per cent of the total value, whereas the initial ambitious goal was to finalise disbursement at the end of June 2016, three years after launching. 

State Bank of Vietnam (SBV) figures show that by mid-January this year, relevant banks have only disbursed nearly VND4.9 trillion ($229 million). 

To bolster disbursement, early this year the SBV has authorised ten more joint stock commercial banks to act as lenders to join the programme, increasing the number of banks involved to a total of 15 (the first five banks being state commercial banks). 

However, so far many banks have not been able to provide loans to any customers from the bailout package. 

Explaining the delay for such lending, Dinh Van Chien, head of the Retail Banking section at TP-Bank, one of the new lenders joining the programme, said, “Applications are still modest, maybe because we are at an early period of the year, when people are reluctant to take up loans.”

Chien said their bank has received 13 applications and has disbursed capital for two of them in total. 

Meanwhile, it took until early this month that Saigon-Hanoi Bank (SHB) has officially deployed lending under the programme whereas several other banks still keep silent about their plans to boost lending under this $1.4 billion bailout package. 

Head of the SBV’s Credit Department Nguyen Tien Dong has attributed the low capital disbursement to insufficient social housing supply sources and the fact that only a few customers have qualified to borrow under the programme. 

While the $1.4 billion incentive credit package is reported to have low efficiency rates, the SBV has recently submitted to the government another request of a VND50 trillion ($2.3 billion) credit package to support the property market based on a Ministry of Construction proposal. 

Earlier, another VND50 trillion credit package to stimulate the property sector, which was marketed massively by the Vietnam Construction Bank (VNCB) and the Thien Thanh Group, has reported failure. 

Since its launching until recently (about a year ago), when the VNCB was acquired by the SBV at zero dong, the package was yet to be disbursed. 

According to senior economist Nguyen Tri Hieu, the poor outcome of the $1.4 trillion bailout package arose from the strict lending requirements and the short lending period compared to the average income of most prospective buyers of social housing. 

Accordingly, with the current average income it may take 20-30 years for buyers to complete payments on debts instead of the 10-15 years as proposed. 

“The new $2.3 billion credit package might incur the same fate unless these two obstacles are properly tackled,” Hieu commented. 

Executives at many property firms have assumed that the current 5 per cent annual interest rate on the $1.4 billion incentive package is attractive, but carries little meaning because only a handful of businesses could satisfy the lending requirements and they would willingly accept higher (7-8 per cent) interest rates if borrowing conditions were relaxed. 

An official at state-owned VietinBank, which was regarded as the most active player in the programme, said, “It has proven rather hard to procure sufficient documents to become eligible for borrowing under the $1.4 billion bailout package. In fact, many customers had retreated and shifted into commercial lending with higher borrowing costs to meet their needs.”

VIR