One of the important industries that has made a significant contribution to Vietnam’s economic growth is the real estate sector. Property-related enterprises have, however, been bringing up some of the challenges facing the real estate market and requesting better access to property loans.

Nevertheless, the fact that property accounted for 21.2% of all credit, the greatest percentage in the previous five years, shows that credit institutions are still making every effort to offer loans for the real estate industry in compliance with existing regulations. Moreover, to help businesses deal with urgent challenges, the State Bank of Vietnam (SBV) is advocating viable measures including decreasing real estate lending rates.

Outstanding credit in property sector reached the highest in 5 years

According to the latest data from the SBV, the credit balance of the real estate sector in the fourth quarter of 2022 is VND 2.58 million billion, an increase of more than 24% compared to 2021. This number is the highest over the course of 5 years. 

Real estate business loans published in the financial statements of banks are mainly loans for the purpose of project development.

In particular, the total real estate credit outstanding of 11 reported banks reached VND 276.5 trillion at the end of 2022, up 25% compared to the beginning of the year. 9 out of 11 banks all increased real estate loans, in which Saigon Bank was the bank with the highest real estate loan growth rate, approximately 81%, bringing the outstanding real estate loan to over VND 1,060 billion by the end of 2022. However, the proportion of real estate loans only accounted for 5.7% of total client loans of this bank.

In contrast, MSB and KienlongBank simultaneously reduced loans in this area with a reduction rate of 14.4% and 13%, respectively, bringing real estate loan balance to VND 10.4 trillion and VND 2.9 trillion.

Among the 11 banks, Techcombank is currently the bank with the highest real estate loan balance, nearly VND 109 trillion, up 13.5% compared to the beginning of the year. This is also the bank with the highest proportion of real estate loans among total client loans, more than 26%.

Mr. Pham Quang Thang, Deputy General Director of Techcombank, said that in 2022, the bank had to mobilize capital from the international market to support domestic capital needs, with total mobilized capital of up to 1.8 billion USD. 

For business loans and investors, Mr. Thang said, the policy of 2022 is to focus on supporting projects with good products and a strong legality profile. Therefore, the outstanding loans of this group decreased by 10% compared to 2021, because the supported investors in 2021 had been able  to deliver completed  projects to buyers.

Techcombank is followed by VPBank with a real estate loan outstanding of VND 67.6 trillion, an increase of nearly 59% compared to the beginning of the year, contributing nearly 16% to the total amount of loans to clients.

Businesses’ claim of struggling with property loans

Mr. Le Hoang Chau, Chairman of Ho Chi Minh City Real Estate Association (HoREA), said that the real estate market is facing difficulties,  the biggest of which are legal issues and access to capital. Starting from the second half of 2022, transactions on the real estate market have slowed down, so it is not possible to mobilize capital from customers. Not only businesses, but also homebuyers and investors also have difficulty accessing credit. The recent lack of capital in the real estate market, according to experts, is due to the turbulence of the corporate bond market.

Besides, Mr. Pham Thieu Hoa, Chairman of the Board of Directors of Vinhomes, asserted that one of the biggest challenges of real estate businesses today is collateral.  In commercial banks’ prudent and cautious view about market risks, they require a higher ratio of collateral than conventional loans. Therefore, when the projects are being implemented, the investor must add other collateral assets.

Moreover, real estate businesses also report facing legal bottlenecks with  a lot of their real estate projects, especially in the South which is the primary reason leading to the high cost of real estate.

In addition, some top real estate corporations said that during the project implementation, some areas do not have available infrastructure, so businesses have to invest in developing satellite cities, which consumed substantial amounts of capital Therefore, businesses demand that there should be a credit mechanism providing more detailed guidance on the development of urban infrastructure in remote and isolated areas.

State Bank is to remove barriers to property loans for businesses

On the other hand, banks have a different assessment from real estate businesses. Considering the statistics, the fact is that the banking industry is favoring real estate. This field is one of 1,571 business lines, but accounts for 21% of the total outstanding loans of the whole economy. That is, the remaining 1,570 occupations are sharing the remaining 79% of the total outstanding loans. Growth for real estate is also high, the proportion in the structure is approximately the same as in priority fields such as agriculture and rural areas.

“We do not lack “credit room”, interest rates always have been at an acceptable level,” Mr. Luu Trung Thai, CEO of Military Bank (MB) assured real estate businesses.

Not only MB, top banks in the market all affirmed that there is no shortage of “credit room” for real estate. Mr. Nguyen Thanh Tung, General Director of Vietcombank, said the bank’s real estate credit increased by 17% last year, higher than the average growth rate. In which, some fields, such as industrial parks, export processing zones, have increased outstanding loans by times.

In addition, the SBV asserts that in 2023, it will continue to operate monetary policy firmly, flexibly, effectively and promptly to comprehensively identify and assess difficulties and impacts to take appropriate measures. The State Bank also orients credit growth in 2023 at around 14-15% with adjustments in line with developments and actual reality in order to meet capital requirements of the economy, as well as ensure the target of inflation control and macroeconomic stability. The State Bank has also organized many conferences to remove difficulties in capital sources for businesses, people and the economy.

The monetary authority will also guide banks to increase credit securely and efficiently, providing economic capital and focusing on viable loan plans with good sales and payment ability, particularly in the real estate sector. 

In conclusion

Recently, some businesses made the point that the real estate sector is struggling with challenges such as legal processes and access to property loans. Aware of these obstacles faced by entrepreneurs, the State and commercial banks have always strived to offer favorable credit policies and circumstances for expansion. Currently, the SBV’s main goals are to ensure liquidity and maintain the system’s security and stability. Also, the banking industry has placed a focus on reforms and simplifications of lending processes to improve access to credit in order to remove barriers for businesses and individuals. These actions bring about a hopeful sign that the property market will become more robust in the year of 2023.

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