Real estate businesses shake hands with banks to increase benefits for buyers

Trinh Tuan Anh, a resident in District 2, Ho Chi Minh City plans to invest VND6 billion ($260,870) in real estate, in a townhouse in the satellite area of Ho Chi Minh City to capitalise on lucrative opportunities in this area. He will spend part of his money and borrow the remaining 50-60 per cent from a bank to pay for the townhouse. He believes that property prices are currently attractive in some potential areas while the bank lending rates are reasonable.

With real estate being the most profitable investment channel, low interest rates drive buyers towards bank loans to buy property

The low interest-rate level helps drive property demand. Several individual investors are pouring capital into the real estate market by taking advantage of financial leverage from bank loans as well as their own savings.

A representative of a real estate firm in Ho Chi Minh City said that with real estate being the most profitable investment channel for investors and low-interest rates, buyers are pinning high hopes on the bank loans to buy property projects, especialy those with bank guarantee.

In addition, the State Bank of Vietnam (SBV) promulgated Circular No.08/2020/TT-NHNN on amending and supplementing a number of articles of Circular No.22/2019/TT-NHNN dated November 15, 2019 by the Governor of the SBV on prescribing limits and prudential ratios in the operations of banks and foreign bank branches. Accordingly, the maximum ratio of short-term capital sources until the end of September 30, 2021 of foreign banks is 40 per cent and from October 1, 2023 it will be adjusted to 30 per cent.

"Banks will be more cautious in screening and selecting real estate projects to provide financial and credit products for both investors and buyers," Trinh said.

With the roadmap of implementing credit-tightening regulations on real estate, banks will offer gurantees for projects developed by capable and reliable developers which have high chances of success in the future.

The real estate market has recently witnessed several tie-ups between banks and developers, including Novaland Group and Vietinbank – one of the four largest state-owned commercial banks of Vietnam. In the first phase of the partnership, VietinBank will provide capital for Novaland’s mergers and acquisitions (M&A) activities of component projects in eco-smart city Aqua City in Dong Nai. Tourism real estate projects like NovaWorld Phan Thiet (Binh Thuan) and NovaWorld Ho Tram (Ba Ria-Vung Tau) will continue to be researched and elicit cooperation under the contents of this strategic cooperation contract.

The tie-up between Novaland and VietinBank will create synergies for both sides as well as the whole real estate market

Vietinbank’s credit package not only offers Novaland more cost-effective financial solutions but also improves the returns for investors. At the same time, investors will have an opportunity to enjoy better interest rates than the market average, reduce liquidity risks, and optimise cash flow for investors.

Giants shake hands to investors' benefit

The tie-ups make sense as the real estate market shows signs of recovery from the COVID-19 pandemic. Thanks to the successful containment of the pandemic, the real estate market remains stable with more positive sentiments and balanced supply and demand. There has been a growing trend of residents moving to satellite cities around Ho Chi Minh City in line with suburbanisation and urban upgrade policies. Therefore, buyers have a lot more choices in terms of products and financial support from banks.

In the first stage of strategic cooperation, VietinBank provides home loan services at Eco-smart city Aqua City (Dong Nai)

In particular, VietinBank will provide preeminent financial sponsorship packages for the individual customers of Novaland while cooperating with Novaland to develop preferential credit package policies for its employees and customers who transact at Novaland and vice versa.

VietinBank will provide a full range of products and services: working capital needs, medium- and long-term loans, loan guarantees for Novaland’s contractors, factoring, international payment; at the same time providing service packages, payment, card issuance, domestic and international money transfer for Novaland and its member units, among others, with a competitive credit policy, pricing, and fees. VietinBank and its members will also be given priority to use convenient services in Nova Group’s ecosystem such as resort tourism, healthcare, education, and entertainment.

Tran Minh Binh, general director of VietinBank said that the strategic cooperation agreement between VietinBank and Novaland will strengthen cooperation at a higher level between the two units through financial services, banking, technology, brand name communication, joint venture, association, and supporting each other to expand and develop business activities.

“The specific programme will be implemented with suitable goals for each phase through the signing of separate agreements and contracts,” he said.

Aqua City is the first project benefiting from the partnership. Covering an area of 1,000 hectares, this is one of the most remarkable urban complexes in the eastern part of Ho Chi Minh City developed Novaland. Phoenix Island in Aqua City, which is the first island urban model, is attracting thousands of visitors weekly. The project not only captures the market's attention but also creates a driving force for the landed property market in Eastern Ho Chi Minh City in the past two years.

In light of the partnership between Novaland and VietinBank, buyers of townhouses, villas, and shophouses in Phoenix will enjoy better interest rates and other incentives to reduce opportunity costs and liquidity risks while earning higher returns in the future.