Credit for real estate is the hottest subject mentioned by popular means of communications last week. Although banks “have slightly opened the door” to re-lend to those customers having demand for buying properties, disbursement still has difficulties in the frozen property market.

Lending is not easy

With an average price of 1800USD/sq.m, apartments of Richland Hill project (Dist. 9, HCM City) have attracted many customers. Dong A Bank offers preferential loans to most of them. Before that, HSBC and MHB have lent to those who buy apartments of Sky Garden (Phu My Hung) with preferential interest rate. Moreover, Sacombank is now lending up to 70% value of Phu Loi No.1 apartment (Dist. 8, HCM City); Viet A Bank provides with hire-purchase of E-Home apartments (Dist. 9, HCM City) within 15 years; ACB even operates home restoration services, etc.

Other banks such as HCM City VCB, Eximbank, MB and so on are considering lending documents after raising credit standards and filtering customers. However, these banks didn’t offer loans as the time of the end of 2007, but now mainly focusing on some projects they know thoroughly and have had business relationship before.

Mr. Le Xuan Nghia, Director of the Banking Development Strategy Department under the State Bank of Vietnam analyzed that the total of realty outstanding loans by September 30th, 2008 is 115, 500 billions VND – 9,15% of total liabilities of the whole system. He said that the State Bank of Vietnam has no terms of banning from property loans, and that commercial banks have closed the real estate market recently due to uncontrollable risks of their easy loans.

Banks’ lending to buy the properties again is not only a good sign for the market but also for some banks having abundant capital. Moreover, except for some banks lending with preferential interest rate of 17-18 percent per year, many banks are lending at 20 percent per year on average. This is an interesting interest rate in its decreasing trend as present.

However, according to the evaluation of experts, capital disbursement in the realty market is not easy any more like in 2007, particularly when people having housing demands are also hesitating about banks’ interest rate pressure. Besides, it is said that the real estate market is likely to slope down towards the risk of increase in bad realty debts. Properties will be released in some next months when contracts get maturity date, but the real estate market is still frozen. The fact is that most mortgage assets of banks are properties. If the real estate market has difficulties, it will put pressure on the enterprises in debt payment. As a result, this makes the market continue to go down.

Real estate needs more capital

Some economic experts advise at this time that banks should continue to extend the real estate loans to avoid great breaks in this market-related credit system. MA Le Xuan Nghia has said that banks’ stop of the real estate lending causes the market to become cold but also brings about other consequences. Many projects are 80-90 percent finished but not continued to implement because of capital shortage, which will result in the bankruptcy of enterprises. According to Mr. Nghia, it is necessary that banks should restructure all debts to continue lending so that the enterprises finish their projects as scheduled. As a result, the enterprises can collect their money, the banks can withdraw their debts and the real estate market will have the opportunity to develop strongly again.

Up to now, all enterprises, authorities and policy makers have begun to be interested in difficulties of the real estate projects. As to the Decree 153/2007/ND-CP on instructing to execute Real Estate Business Law, one of the conditions for the enterprises to transfer the whole or a part of new urban projects, housing projects, infrastructural projects of industrial zones is “site clearance completion and infrastructural work equivalent to approved speed of construction”. MA Le Xuan Nghia has told that with this regulation and the capital stalemate for the real estate projects, if the banks don’t classify the projects to fund for some investing projects, this will make the real estate market more difficult.

The investors also suggest the government to widen conditions of project transfer or that of capital reception from homebuyers.

Office rent price continues to drop

Last week market’s the prominent characteristic was office rent price decrease. Offices for lease, especially in HCM City, begin to change remarkably together with macroeconomic fluctuations; causes the enterprises become more prudent in term of office construction. On the first week of October, grade-B office rent price (not be located in Dist. 1, HCM City) is down to 35-45 USD/sq.m/month. According to CBRE Vietnam’s forecast, office rent price will continue to drop about 10-15 percent in late of 2008 and early of 2009. The volume of renting newly-built offices has begun to fall gradually. At present, some buildings in district 1 and 3 are finished, therefore, there is still much space for lease.

The plentiful source of supply and competitiveness are the reason of quick drop in price in term of offices for lease. In Hanoi, small office construction (grade-C) is considered as a feasible and profitable solution at this moment. In the wave of the businesses moving from grade-A, grade-B offices to grade-C ones or finding renovated houses to rent to cut down costs, executive director of Tai Tam & Colliers International Co., Ltd. has said that real estate management companies and agencies also find easy to look for customers for small offices because median – and small enterprises take majority in Vietnam.

Le Dinh