State Bank of Vietnam (“SBV”) has officially issued Circular 06/2016 to amend some articles of the previous Circular 36/2014, which will ease the real estate credit-tightening roadmap till 2018. However, many enterprises in HCMC have repeatedly sought for foreign capital to reduce the dependence on bank loans.
Credit-tightening on real estate has not been executed this year.
Circular 06/2016 was officially issued by SBV on 27th May 2016. It is the result of several suggestions, positive arguments from experts and the relevant authorities. This Circular will not immediately tighten the credit flowing into the real estate market, but it will stretch out the implementation.
According to Circular 06/2016, the ratio for short-term capital use of commercial banks for medium and long term loans is still at 60%. That ratio will remain at 50% in 2017 and will go to 40% in the beginning of 2018. The period of credit-tightening is delayed a year in comparison with the former draft. The risk index of receivables for real estate business will increase from 150% to 200% in the next year (instead of the increasing the rate of 250% as stated in the former draft).
Mr. Dinh Duy Trinh, CEO at Ban Viet Land, stressed that fact that the SBV has received opinions from the association, as well as from professionals is remarkable. Not only enterprises, but buyers are also getting more confident to make investments.To respond to the petition of the HCMC Real Estate Association (HoREA), concerning proposals to amend Circular 36/2014, SBV’s HCM City branch has also confirmed that the purpose of the amendment is to ensure the safety of bank credit activity and limit risks due to the enormous credit growth in real estate. However, there should be a roadmap to deploy the plan (1- 2 years) to prevent risks arising from the policy and affecting to bank activities negatively.
The acceleration of foreign capital
In HCMC, from the beginning of this year, there are at least six foreign investment funds that have announced their new investment cooperation in several projects. Other signed projects have already been deployed.
Phat Dat, An Gia Investment and Creed Group (Japan) signed a joint investment in River City project with the scale of US$500 million, which is a typical case. Nam Long signed with Nishi Nippon Railroad and Hankyu Realty (Japan) to invest in the Fuji Residence investment projects. Tien Phat Corp and Sanyo Homes Corporation (Japan) have joined in a strategic cooperation project with their first product being the Ascent Lakeside project. Thu Duc House has cooperated with Pavo – the investment fund to invest in more than five projects in the near future. SynGience (Singaporean Investment Fund) poured 400 billion VND into Tham Luong Depot Metro project.
Mr. Pham Le Tuan, General Director of JSC Real Estate Investment Hung Loc Phat shared thatwhen the SBV began sending out their first message of credit-tightening, many enterprises worried about seeking for new sources of funding. In particular, investment capital from foreign funds is the most attractive channel to enterprises.
“Those enterprises that have not found a reliable source in replacement when banks starts to tighten the credit are forced to be more cautious in their business plan. As for our company, the ultimate criterion is to guarantee the stable development in our business. The proportion of loans in different projects is only 15% – 20%, so we are assured to implement several projects without considering seeking foreign capital “– Mr. Tuan Pham shared.
Besides the fact that domestic enterprises want to reduce their dependence on domestic banks through foreign capital, Partner Thai Binh Tran at LNT & Partners Law Firm said that there are many reasons that lead to increasing foreign investment. Particularly, it is due to the openness of regulations on investment, and capacity to own local real estate for foreigners. Savings rates in some countries, such as Japan and Singapore, are less attractive compared to the interest rate expectations in Vietnam’s real estate market.
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