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Bank loans still beyond reach of real estate developers   2009-02-19 - VietNamNet/VNE

Many commercial banks have slashed lending interest rates to around 10% per annum, but real estate developers complain that they still can’t get bank loans.


Ta Van Trung, Director of Song Da 1.01 Joint stock Corporation, said that though interest rates have been cut, real estate developers still cannot get loans due to too many procedures.


“Banks ask too many questions, like about the expected date of project completion, about expected profit and clients,” Trung said.


“In general, banks prioritise funding projects in inner cities. But how many enterprises have land plots in inner cities to develop projects,” he asked.


Le Vu Dung, Director of Song Hong Land, which is implementing projects on improving apartment blocs, said that commercial banks always set overly high requirements for loans; therefore, he never ‘dreams’ of borrowing money from banks. Moreover, banks always ask real estate developers to prove the feasibility of projects by showing that the projects have buyers.


Meanwhile, according to Dung, this is absurd as investors cannot lure clients until projects are finished.


“We don’t expect much from the 4% interest rate subsidy programme,” he said.


He went on to say that real estate developers are whispering in each other’s ears that only projects on houses for low-income earners will have a chance to access funds from the interest rates subsidy programme. Meanwhile, Le Hung Manh, General Director of Gia Hoa Company Ltd, which plans to build houses for medium-level income earners this year, said that the company has not thought of borrowing money from banks for fear of complicated procedures.


Nguyen Duc Huong, Director of Lien Viet Bank, admitted that the bank prefers mortgaged assets with high liquidity, like savings books and valuable papers, while properties are considered as having low liquidity.


“Only projects in inner cities or ones in advantageous positions are prioritised, while we look at projects in suburban areas with critical eyes,” Huong said.


Meanwhile, Director of Dong Da Branch of Eximbank Dao Trong Thanh said that banks still have to be cautious with real estate projects. “Only highly feasible projects will get loans from banks,” Thanh said.

However, this “cautiousness” has been criticised by real estate developers, who say that the strict requirements have made the real estate market’s liquidity worse.


They say that in order to save the real estate market, the real estate market’s liquidity needs to be improved, which can only be obtained if banks loosen loan requirements.


Real estate developers have urged the State Bank of Vietnam to consider giving interest rate subsidies for real estate projects as well. They say that the real estate sector needs to receive “equal treatment” as the market can help create jobs, stimulate demand and make products for GDP.


However, experts say that real estate developers also need to try to rescue themselves.


Pham Sy Liem, Deputy Chairman of the Vietnam Construction Federation, said that developers need to accept lower profit in return for quick sales of products. Liem also said that investors should be more flexible in meeting the demands of clients.


“If you have a large house, but a client wants a smaller one, you should think of satisfying clients by turning the large house into two smaller ones,” he said.

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