The State Bank of Vietnam has tightened lending for domestic real estate to avoid a bubble and encourage the flow of capital into manufacturing and agriculture.

The action was ordered by the Prime Minister, the bank said.

Duong Thu Huong, the Vietnam Banking Association Secretary General, said the action was reasonable as long as the situation was continually reviewed.

Vo Tri Thanh, deputy head of the Central Institute of Economic Management, said limiting loans for the property sector to 10-15 percent of outstanding credit would prove difficult.

However, Hoang Viet Phuong, Maritime Bank deputy director of corporate customers, said real estate loans of banks were identified in credit contracts, so if borrowers sought more than their quotes they had to explain why.

The state bank could tell when a bank tried to pass real estate lending over as consumption lending, he said.

In 2009, outstanding loans for property reached 200 trillion VND, representing 11.76 percent of the total outstanding credit.

Hanoi and Ho Chi Minh City account for 65 percent of the loans which were for repairing and buying houses for consumers and building infrastructures at urban areas and industrial zones./.