Property sector feels the squeeze

Tran Minh Hoang, general director of property developer Vinaland,  said that real estate sector had been squeezed due to lack of funds.

Tran Van Thanh, chairman of Vietnam Housing Company, compared the local property market as a growing child lacking nutrition which was hurting its natural development.

According to the State Bank’s data, currently local lenders are lending house borrowers at interest rates of 16-20 per cent per year.

Meanwhile, Circular 13/ NHNN-TT coming into effect from October 1, will force banks to set loan loss provision at 250 per cent of their loans to real estate business.

A private commercial bank’s general director said that this tightening over lending to property sector was the right move, but it was not the appropriate time.

“The circular was designed to prevent any possible asset bubble in the economy, but 250 per cent is a sky-high level. Now any lender may have to think four or five times before extending loans to real estate sector, not twice,” he said.

Le Xuan Nghia, deputy chairman of the National Financial Supervision Committee, noted that a cautious attitude of the authority was understandable.

“It will ensure the stability of the banking system in the long-term,” Nghia said.

An executive of a Hanoi-based commercial bank said what the authority was doing was forcing local lenders to almost close the doors on property lending.

“The tight policy could freeze the real estate market. The authority would then have to relax step by step to help this key sector,” she said.

Over the first eight months of the year, credit expanded by 16.27 per cent. In 2010, credit growth target set by the government was 25 per cent. Banking experts said that with the credit expansion much slower than expected in the first seven months of 2010, the authority might be under pressure to boost monetary expansion in the fourth quarter to ensure annual economic growth target.

Meanwhile, fund mobilisation expanded by 17.75 per cent over the first eight months of the year. This is a rare year which credit grew slower than fund mobilisation.