Deputy Governor of the SBV Dao Minh Tu noted in a recent news conference that credit growth reached roughly 13.5% by the end of 2023, and total credit debt for the entire economy was around VND 13.5 million trillion by the end of 2023. This percentage falls short of the 14-15% aim.

Real estate is eager for funds

This suggests that banks are still hesitant to lend to the economy. According to Mr. Dao Minh Tu, the whole financial sector is now dealing with the issue of excess liquidity.

While banks are cautious to lend, the year 2023 will be difficult for real estate enterprises owing to capital difficulties. According to data, the total credit debt for the real estate industry in banks reached VND 2.74 million trillion as of the end of September 2023. Real estate credit for consumer/self-use reasons accounted for 64% of this total, with credit for real estate commercial operations accounting for 36% of total real estate credit debt.

Experts at VIRES feel that part of the reason for this anomaly is bank caution regarding the real estate sector. Banks want secure projects during bad economic times, and real estate project loans often have periods ranging from 10 to 20 years. As a result, due to system safety concerns, the lending ratio for long-term real estate projects employing money mobilized from deposits into the banking system must also be limit ed.

Another factor making it difficult for real estate companies to obtain money is that interest rates are not falling as predicted, especially considering the current business environment.

Mr. Pham Duc Toan, CEO of EZ Property, told Dau Doi Dau Nay (DDN) that, while deposit interest rates have dropped dramatically, interest rates on real estate loans have not. Commercial banks currently charge interest rates of more than 10% per year, with Vietcombank charging the lowest, at 7%. However, this bank has stringent standards, such as yearly income of at over VND 100 billion and no loans for enterprises with little revenue or losses.

Unblocking the Capital Flow

Implementing solutions to boost the capital absorption capacity of real estate enterprises is critical to contributing to the growth of the real estate industry.

Associate Professor Dr. Nguyen Thi Mui, a member of the National Financial-Monetary Policy Advisory Council, urged that credit institutions continue to examine existing loan contracts, processes, and terms. Simultaneously, cost-cutting efforts to lower interest rates on company loans should be introduced. Furthermore, funding should be focused on projects with the possibility for prompt completion in order to satisfy genuine housing demand.

To avoid massive capital stagnation in the high-end real estate market, projects that are not closely matched with genuine demand and speculative business operations should have credit rigorously managed.

Furthermore, financial institutions and investors must analyze the present condition of real estate projects that are currently under loan, addressing challenges and barriers in each project. Relevant authorities should seek solutions for projects that face legal procedural issues. Banks should also verify that agreements and credit arrangements negotiated with real estate companies and homebuyers are carried out.

According to Economic Expert Prof. Dr. Ngo Tri Long, numerous solutions must be deployed to solve the current issues in the real estate market, and the synergy between these solutions will provide a powerful driving force for market recovery and development. He underlined the need of collaboration from all sides and sectors in order to boost the capital absorption capability of real estate enterprises.

Mr. Nguyen Quang Thuan, Chairman of Fiin Group, emphasized the necessity of real estate developers proactively addressing legal difficulties with the Government and local authorities' strong cooperation. This is an essential condition for general market openness and specific funding sources in particular.

Mr. Thuan advocated, in the long run, the formation of a complete real estate credit program, with a concentration on the mid-to-low-end housing market. This program tries to strike a balance between the interests of all parties concerned. Project developers will be responsible for completing legal issues under this plan, with assistance from other stakeholders. They will commit to publicly decreasing real estate product costs, and commercial banks will consider drastically cutting borrowing rates for purchasers who fulfill certain criteria.