Real estate grapples with new focus

August 22, 2023 | 10:14
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Real estate insiders are predicting a strong end to 2023 in terms of recovery in various segments, and launches are already underway, but this will occur in tandem with government moves to adjust currently tight regulations on real estate lending.

On August 17, an urgent dispatch was issued on solutions to improve access to corporate credit and to amend unreasonable points of Circular No.06/2023/TT-NHNN from June.

Real estate grapples with new focus
Real estate grapples with new focus, illustration photo/ Source:

To continue to effectively implement solutions to improve credit access, Prime Minister Pham Minh Chinh has directed and entrusted Deputy Prime Minister Le Minh Khai to urgently chair a meeting with the representatives from the State Bank of Vietnam (SBV), the justice and finance ministries, the Government Office, and related state agencies to amend Circular 06 and report to the prime minister before by the end of this month.

Circular 06, which amends and supplements a number of articles of a 2016 circular that provided operations for loans from credit institutions and foreign bank branches to customers, has new regulations on restrictions on real estate lending.

In mid-July, the Ho Chi Minh City Real Estate Association sent an official dispatch to the prime minister and the SBV, requesting consideration of amendments to Circular 06 and its related documents.

From six cases that do not allow loans from banks, Circular 06 adds another three cases to the ban. Banks are not allowed to lend money to pay for capital contribution, purchase, or transfer of contributed capital or shares of limited liability companies, partnerships, and joint-stock companies not yet listed on the stock market, or not registered for trading.

Lenders are also not allowed to lend money to pay for capital contributions under the capital contribution or investment cooperation contracts for implementing a project that is not eligible to be put into business under law at the time the credit institution decides to lend.

Furthermore, banks are not allowed to lend for financial compensation unless the loan fully meets the conditions specified in Circular 06.

According to the SBV, the circular aims to control the use of capital for the right purposes and reduce the risks of handling collateral. Businesses, however, believe that the provisions need to be made clearer; otherwise, it is likely that each bank will interpret it differently, which leaves investors unable to raise capital.

This also means that the investor can raise capital, but they have to invest their own capital to complete the project. This is deemed an impossible task for the vast majority of developers.

Launching new products

Despite the regulatory hurdles, in recent months, many real estate developers have been preparing to launch new products with a series of attractive sales policies to attract buyers in the year-end period.

Nguyen Thi Thanh Thao, sales director of Phu Dong Group, said that the real estate market now is a time of focus for both developers and investors.

“We can see very clearly many signals to support the market, such as interest rate reduction, savings maturity, and the demand to have accommodation from the people remaining high,” Thao said.

Tran Khanh Quang, general director of Viet An Hoa Real Estate Investment JSC, said that the tough status in the market would not fade away overnight.

“However, from Q4 onwards, if factors supporting the market appear with stable growth of securities, savings interest rates reduction, and easing lending to private businesses, then the real estate market could resume strongly,” Quang said.

In Ho Chi Minh City, Glory Heights, Akari City, Mizuki Park, Masteri Centre Point, The Global City, and others are launching new products.

At the end of July, Vinhomes shocked the market when 2,000 units of the Glory Heights apartments project, belonging to Vinhomes Grand Park in the east area of Ho Chi Minh City, were sold within just a few days.

According to DKRA Vietnam, 12 projects were launched for sale in the third quarter, with a total supply of less than 3,800 units in Ho Chi Minh City and surrounding areas in July alone.

In Binh Duong province, Bcons, Phu Dong Group, C-Holdings, Pi Group, and Le Phong Group are launching affordable apartments. In particular, Phu Dong Group will start construction of the SkyOne residential project in the fourth quarter with a price of about $61,300 per unit.

Meanwhile, in Hanoi, many investors are continuing to sell products. Hung Thinh Corporation has opened for sale a third tower at the Residences Linh Dam project, while Taseco Land has opened a project for sale in Bac Tu Liem.

In Dong Nai, Novaland, Ecopark, and Thang Long Real Group are along those actively pushing projects. In Nhon Trach district, Thang Long Real Group is introducing the Fiato City apartment project with starting prices at $71,700 per unit.

In the central area, Hung Thinh Corporation kicked off the new sub-area of Merry Land Quy Nhon in June with a price of around $42,200 per unit, while Sun Cosmo Residences in Danang launched with prices of up to $3,580 per square metre.

A fresh cycle

David Jackson, CEO of Colliers Vietnam, said that the next group of properties in the sights of investors included houses and serviced apartments, especially those that served the needs of foreign workers coming to Vietnam. “Therefore, projects that meet a high standard of living are becoming the focus of the market right now,” he said.

Current investment sentiment and activity will last until year-end, with institutional investors sharing their experiences and individual investors “holding their breath” until the end of the year, according to Jackson.

“Unfavourable economic conditions have had a significant impact on the Vietnamese economy. However, the growth drivers have remained solid, ensuring the country’s recovery process,” he added.

Nguyen Duy Thanh, CEO of Phuc Hung Real Estate, said investors will return to the market based on lowering of interest rates, the removing of legal difficulties, and the government disbursing public investment.

“Some indirect movements through promotion campaigns and project transfers to generate cash flow are bright spots in the hope that the market will be more proactive going forward,” Thanh said.

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