Only real estate projects which meet the demand could be eligible for bank loans

Banks only focus on lending for effective investment projects, profitability, and investors with sufficient financial capacity to limit risks.


Below are the straightforward sharing of Mr. Nguyen Quoc Hung - Director of the Department of Credit Industries (State Bank) on the banking industry's view on the issue of "squeezing" real estate loans through new provisions in draft Circular 36 (amended):


- The State Bank has recently been extensively consulted on the Draft Circular to replace Circular 36/2014/TT-NHNN. Notably, there are some opinions that the draft content negatively affects the real estate market. Can you give me your opinion on this comment?


The content of the draft replaces Circular 36 amending a number of regulations related to safety ratios in operations of foreign banks and bank branches. In particular, it was mentioned to reduce the ratio of short-term capital sources for medium and long-term loans. This means, this was the rule that applies to investment loans in all areas of the economy, not just real estate.


Accordingly, the implementation schedule will include 3 periods, time to 2022, the goal of reducing the maximum rate of short-term funds used for medium and long-term loans to 30%. With this roadmap, the State Bank will control liquidity risks, helping the system to be secured to changes in macroeconomic conditions. At the same time, it contributes to creating stability for banking operations, supporting the promotion of sustainable economic development.


The draft circular also provides for risk factors for loans. Accordingly, with a loan to buy real estate from VND 3 billion or more, the risk factor is 150%; outstanding loans from VND 1.5 billion to under VND 3 billion have a risk coefficient of 100%. In particular, with a loan of less than VND 1.5 billion, loans to purchase social housing, buying houses under projects, the Government support program will only be subject to a risk factor of 50%. This move aims to direct capital flows to the real needs of the people, creating opportunities to develop affordable commercial housing segment and social housing (the segment is short of supply). Such a roadmap is very suitable, so it can be seen that the draft circular does not negatively affect the real estate market as mentioned above.


- In the quarter 4/2018, real estate credit grew negatively, is this worrying and negatively affects the supply of real estate market?


Mr. Nguyen Quoc Hung, Director of Department of Credit Industry


The growth of real estate credit (including real estate trading and buying) by the end of 2018 reached 31.76%. Therefore, the policy of the Government, the orientation of the State Bank on real estate credit growth is to strictly control real estate credit, while also directing capital flows into effective and projected projects. social housing projects, cheap commercial houses and real needs of people. The draft to replace Circular 36 also aims at this goal.


Besides, with a project, the structure of normal capital will include equity, borrowed capital, advance capital of borrowers and other capital sources. In fact, the investment capital of real estate enterprises is mainly based on the banking system. Accordingly, banks not only provide direct funding to investors but also sponsor indirectly finance loans to home buyers to pay advances to investors.


Thus, the source of capital for real estate supply also includes capital from the demand side. In other words, credit capital for housing needs is in the credit capital for real estate business. That is, the negative credit growth in quarter 4/2018 does not reflect the lack of capital, reducing the credit capital for real estate business.


In addition, credit for real estate in the first 3 months of this year increased by 3.29% compared to the end of 2018. This is a higher increase than the overall growth of the economy, so it is not satisfactory to assume that the field Real estate sector is suffering from credit tightening.


It can be said that real estate business is a potential risk area but this does not mean that banks will limit lending to this sector. Instead, the bank will only choose to lend to effective investment projects, investors have sufficient capacity and profitability to limit risks. This also means that credit institutions do not lack capital, nor limit lending to real estate but rather selective lending. I repeat, the orientation of the State Bank is still to strictly control credit for the real estate sector but to serve the real needs of people.


- So can you point out why the real estate market in the first months of the year is quite quiet?



The quiet real estate market in the first months of the year has a cause mainly due to phase difference in supply and demand. Artwork: VNA


Operating on the real estate market based on the law of supply and demand, the difference in supply and demand is the first reason for the quiet market. Many developers currently focus on high-end apartments, tourism apartments and resorts, but people only have demand for affordable housing segment, and this segment is lacking in supply.


Another reason is due to the consumption habits of people, the time after the Lunar New Year, the first months of the year people often have less real estate transactions. In addition, according to me, the localities have simultaneously pushed up the inspection, supervision and review of project licensing, approval, and adjustment of planning, especially in some big provinces and cities, which have caused many projects. on schedule as originally planned.


Disputes and complaints in apartment management, the investor's failure to comply with the commitments, handing over the house behind schedule... is also a cause affecting the confidence of home buyers. However, I think that this is also an opportunity for management agencies and real estate enterprises to look back on the weak causes of the market, thereby developing strategies in the long term, improving capacity. finance and restructuring the product portfolio, improving product quality, thereby regaining the reputation and trust of home buyers.


- Recently, the Vietnam Real Estate Association has proposed several times on the provisions of the draft Circular to replace Circular 36. The Association considers that the contents reduce the maximum rate of short-term capital used. Using medium and long-term loans and increasing the risk factor for housing consumption loans is a measure of credit tightening, causing a decline in real estate supply. Do you have any comments on these recommendations?


In fact, the recommendations made by the Association on the roadmap to reduce the maximum rate of short-term funds used for medium and long-term loans are also an option that the State Bank considers. Accordingly, each year, the State Bank will adjust down from 3-4% to reach a maximum rate of 30% from 01/7/2022.


As for the judgment on increasing the risk coefficient from 50% to 150% for life service loans, the principal balance of 3 billion VND or more of the Association is incorrect. By adjusting the risk factor of loans to real estate sector in line with the Government's policy on completing mechanisms, policies and laws related to the real estate market. These are steps to ensure the effective and sustainable development of the real estate market and the operational safety of the banking system.


Moreover, the change in regulations in the draft Circular to replace Circular No. 36 also helps real estate enterprises have the motivation to improve their capacity and reputation to mobilize capital in the capital market both at home and abroad, reducing dependence on credit capital, this is also the current international trend.


- Thank you Sir!


According to Vietnam+