The dividing of land into lots to sell for profit is rampant nationwide. Banks started to tighten credit into the real estate sector to direct the capital flow into production and business for post-pandemic economic recovery. (Photo: VNA) This requirement was raised in the context that the capital flow into the realestate market in the first months of this year increased rapidly, triggeringconcerns about rampant speculation which was pushing up property pricesnationwide, while the Government was making efforts to control flows into therisky sector through credit and corporate bond channels.
Accordingly, the central bank’s branch asked credit institutions in thesouthern city to limit lending for investment in the high-end and tourismproperty segment and for speculation.
The transfer of money collected from property transactions must also be putunder strict management.
Banks must provide flexible credit policies for those who had real demand forborrowing for home purchases, the branch asked.
Earlier in April, the central bank’s Banking Supervision Agency also askedcredit institutions to strictly manage credit growth and credit quality forrisky sectors including real estate, build-operate-transfer (BOT) andbuild-transfer (BT) projects, corporate bonds and securities. Besides, bankswere also required to strengthen control of credit grants to borrowers whoparticipate in land auctions.
Recently, some banks also temporarily halted providing new loans to the realestate sector, including Sacombank and Techcombank.
Sacombank asked its branches not to grant credit for new property transactionsfrom March 23 to June 30.
Sacombank’s deputy director Phan Dinh Tue said that as the bank’s remainingcredit room granted by the State Bank of Vietnam was small, the bank must tightencredit for the real estate sector and direct the flow into production andbusiness.
Sacombank would give priority to the manufacturing sector, agriculture andrural sector, export, part-supply industry, small and medium-sized enterprises,enterprises which applied high technologies and high added value services, hesaid.
Still, Sacombank was willing to provide loans to those who had real demand forhome repairs or purchases.
Since October 2021 when HCM City reopened its economic activities after a longperiod of closure to fight the COVID-19 pandemic, the capital demand ofenterprises was huge, reflected through robust credit growth in the first fourmonths of this year.
Nguyen Duc Lenh, Deputy Director of the State Bank of Vietnam’s HCM Citybranch, estimated that the total outstanding loans reached over VNĐ3quadrillion as of the end of April, increasing by seven percent against the endof 2021. This was the highest growth rate in many years, he said.
The central bank targeted the credit growth rate at 14 percentthis year and said that it could be flexibly adjusted depending on thecircumstances. Currently, many commercial banks are running out of credit room,thus tightening credit into the real estate sector was essential to direct theflow into manufacturing and business to accelerate post-pandemic economicrecovery.
According to Nguyen Van Dinh, president of the Vietnam Association of Realtors,credit tightening was necessary as dividing land into lots to sell for profitwas rampant nationwide together with violations in bond issuance.
Credit tightening might not make real estate prices go down but liquidity coulddecrease and prices would go sideways, Dinh said.
Nguyen The Diep, chairman of Reenco Song Hong Investment Joint Stock Company,said that the real estate market needed a large amount of medium and long-termcapital, especially in the post-pandemic period.
Diep said that any adjustments in capital sources in the real estate marketwould have huge impacts and when the real estate market had a problem, theeconomy would be affected. He said that caution and careful consideration mustbe given to credit tightening.
The credit tightening must be for specific segments, Diep said, adding that forthe segments which were in a shortage of supply, such as low-cost homes, it waseven necessary to expand loans to meet market demand.
In another effort, the Ministry of Finance has asked the General Department ofTaxation to raise measures to prevent tax losses in real estate business andtransfers./.
VNA
