Government confirms bank guarantee for house buyers

Photo Duc Thanh

At a Government regular meeting held recently in Hanoi, governmental spokesperson, Minister and Head of Government Office Nguyen Van Nen said that the level of guarantee fees will depend on the capacity and prestige of every developer.

The above reflection from the government was released as a reaction to concerns from developers and buyers on the detailed guidelines and exact percentage figures regarding bank guarantees to be paid on real estate development projects.

“The implementation of guarantee payment to the bank from real estate developers has been regulated in the amended Law on Housing which will be come into effect this July to ensure the right of the buyer,” Nen stressed.

Specifically, when the developers sell or lease an unfinished project guaranteed by bankers, but fail to hand over the units to buyers according to the agreed schedule, then the banks would be responsible for repaying this guarantee for the buyers.

Nen stated that the State Bank of Vietnam is currently framing the guidelines for the details-related issues. These frame guidelines will be sent to the related bodies very soon.

However, the exact percentage to be paid by the developers has yet to be revealed as of yet.

According to many developers, this obligatory guarantee will bump up the overall unit price of properties.

Although the bank guarantee has not been revealed yet, industry insiders expect that it will be between 1 to 2 per cent of a project’s total investment capital, or around VND600,000 ($28) per square metre.

However, as Nen stressed, the guarantee will be tied to the reputation of the developer and so the guarantee fee could change from one developer to another, depending on their record.

This information has received varying reactions from buyers. Hoang Manh Hung, a real estate agency in Lieu Giai Street in Hanoi said that it will be hard for buyers to take on any additional financial pressures.

“Developers are now doing their best to reduce the price of every square metre of housing as much as possible in order to attract customers, they would not be happy to add this sum into the value,” Hung said.

Meanwhile Nguyen Thi Hoa, a buyer from Thang Long Number 1 project in Hanoi said that she was happy enough with this bank guarantee.

“Even that we [buyers] have to pay more for every square metre of the house, our right will be ensured by the bank and this is fair enough for us,” Hoa said.

However Hoa is still concerned over what actual price hikes will result of the guarantee and whether developers will abuse this.

“We hope that the State Bank’s guidelines will solve all remaining outstanding issues related to the bank guarantee,” Hoa said.