Dung grabs sector by the horns

Many distressed property firms are looking for fresh oxygen to keep alive

Directive 2196/CT-TTg dated December 6 is viewed as a positive step towards breathing life back into a sector which has been dormant over the last one year because of tight credit as a result of the government’s Resolution 11 issued in April with the aim to curb runaway inflation and stabilise the macroeconomy.

In the directive, Dung required management bodies to improve their inspections, appraisal and license granting procedures for housing and real estate projects. Dung also charged the Ministry of Construction (MoC) with guiding other related bodies in completion of a legal framework on housing and real estate business.

As part of the new directive, the MoC was also given the responsibility for reviewing all real estate projects and reporting to the prime minister within the first quarter of 2012. The Ministry of Finance, meanwhile, has been tasked with submitting a proposal on real estate taxation to the government within the second quarter of 2012.

This is being done to limit speculation and make more effective use of natural land resources. The other goal is bring the personal income tax imposed in real estate transactions more in line with the real situation on the ground.

Dung also asked the State Bank to draw up a guideline for commercial banks and financial institutions to keep real estate credits in a safe percentage. The State Bank was also charged with limiting loans for land clearance and compensation, new projects, luxury real estate projects and strictly managing and limiting loans to individuals who want to borrow for real estate business.

According to the directive, commercial banks were allowed to lend housing projects which were able to sell and recover investment capital in 2012. This latest directive comes in the wake of the State Bank’s loosening of credit for the real estate sector some four weeks ago.

Document No.8844 stated that four real estate groups were officially excluded from the so-called “non-production” credit category and could obtain loans from banks. People using salaries and wages to buy property will be able to access bank loans as will developers of housing development projects which will see handover or their projects coming online before January 1, 2012.

In addition, loans for housing projects for lease and sale accommodation for low-income earners in industrial processing and economic zones are excluded from the “non-production credit” category.

Under this document, these four real estate groups will be not subject to the 16 per cent credit growth cap until the end of December 31, 2011. Yip Hoong Mun, deputy chief executive officer of CapitaLand Vietnam, said that this loosening signalled the government was willing to listen and to help business sectors.

“This is a positive sign and I hope that there will be more loosening for the next year. Then more people will have bank financing, and developers can borrow money from banks to finish their projects and the real estate market can recover sooner,” Mun said.