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Some have even asked the banks to take possession of the properties they had mortgaged.
Banks are putting pressure on their debtors to repay loans so that they can reduce outstanding loans to non-production sectors to 16 per cent by year-end as required by the State Bank of Vietnam.
The general director of a joint stock commercial bank, who did not wish to be named, said this year his bank had just focused on collecting property debts.
Usually premature repayment attracted a penalty, but this regulation had been eased to coax borrowers into paying, he said.
But none of the efforts were working, he admitted, saying only individual customers who had borrowed by mortgaging houses were repaying.
The reason for developers' inability to pay up is clear: the market slump means most of them make no profits or even cash flows.
A deputy general manager of another bank said many developers who have borrowed right from the initial stages of their project can be "exhausted" now after paying interest for three or four years and facing a tightened credit market.
Banks have decided to join hands with the borrowers to resolve their difficulties and save themselves, he said.
They will continue to fund projects that are nearly complete so that the developers can sell them.
However, the banks will also pressure them to come up with other solutions such as offering discounts – even selling at cost – freebies, and flexible payment terms to attract buyers, he said.
A deputy general director of a joint-stock bank in Ho Chi Minh City's District 1 said developers with assets but without the capacity to repay are being forced to transfer ownership of their projects, including apartment and office buildings and lands.
This is the reason for a big fall in outstanding non-production loans at many banks, he explained.
The chief of a sub-registry in a downtown district in Ho Chi Minh City said he has registered the transfer of titles to many buildings in the last few months, with the transferees being banks.
Many property firms reported big losses in the third quarter due to the market slowdown and high interest rates. Phat Dat Property Development Corporation, for instance, announced a loss of VND7.17 billion ($336,600). The PetroVietnam Power Land JS Co and Van Phat Hung Corporation reported a loss of VND4.4 billion ($206,500) and 3VND3 billion ($140,800).
With the property market showing no signs of recovery and credit policy remaining tight, the ability of many developers to even pay interest on loans is questionable, economists said.
As of the end of September, Phat Dat Property Development Corporation owed a total of over VND538 billion ($25.2 million) to banks at around 21.6 per cent per year, meaning the company has to pay more than VND9 billion ($422,500) in interest alone every month. Van Phat Hung has to pay more than VND10 billion ($469,400) a month, Tuoi Tre newspaper said.
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