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Interest rate decreases won’t help real estate market   2008-11-12 - VNE

Lending interest rates have decreased to 15-16% per annum, and are expected to go down further in the time to come as a result of the competition among banks. However, experts say that even lower interest rates could not help change the face of the real estate market.


Experts say that in order to ‘relieve the real estate market of its run of bad luck’, it is also necessary to extend debts as the liquidity of the market is weaker.

The experts say that in order to ‘relieve the real estate market of its run of bad luck’, it is also necessary to extend debts as the liquidity of the market is weaker.


“Loosening credit and lowering interest rates just bring ‘spiritual support’ to real estate firms; they can’t rescue them from the current difficulties,” said Le Chi Hieu, Chairman and General Director of Thu Duc House.


Hieu said that 15% per annum is still overly high for real estate developers. With them unable to sell products, demand down, the low liquidity of the real estate market, the more money businesses borrow, the bigger their losses.


Director of Phuc Duc Real Estate Company Lam Van Chuc said that even a 12% interest rate would be too high in the current situation.


Chuc said that real estate developers would need to sell products and get the profit of 20% for one year to be able to afford the 15% interest rate.


According to the director, the real estate market will not recover until 2011, while the first signs of recovery will not be seen until early 2009.


Therefore, what most real estate developers want nowadays is for banks to extend the deadlines for their debts.


Meanwhile, Chairman of the HCM City Real Estate Association Le Hoang Chau has many times asked commercial banks to extend debts and loosen credit to rescue real estate firms.


The former Governor of the State Bank of Vietnam has promised to forward proposals by real estate firms in HCM City to relevant ministries and the government so that effective measures to rescue the market can be found.


For the moment, real estate developers are sitting idle, as making no money is better than losing it.


“Taking no action is the best solution for now,” Chuc said.

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