The real estate market in HCM City froze in the first quarter as demand and purchasing power tumbled due to COVID-19 (Photo: VNA) HCM City (VNS/VNA) - The Ho Chi Minh City Real Estate Association (HoREA) has asked for corporatebond regulations to be loosened to help businesses get through the COVID-19pandemic.
According to HoREA Chairman Le Hoang Chau, bonds hadbecome a key tool for real estate firms to raise funds for projects. Theassociation suggested that real estate firms be permitted to continue raisingfunds from bond issuance as they faced difficulties from the outbreak.
From January to March, about 53,000 units went on salebut only 14 percent were sold – the lowest rate in four years. Eight hundredreal estate trading houses, or 80 percent of the total, were closed during theperiod.
In total, 94 percent of real estate firms closed, whilenew businesses declined by 12 percent on-year.
The real estate market had frozen in the first quarter,Chau said. Trading volume fell 70 percent on-year and total revenue slumped 80 percenton-year, leading to a shortage of cash and liquidity.
Policies should be amended to assist the development ofthe corporate bond market, while promoting transparency and protecting therights and benefits of investors and companies.
It is not the first time real estate firms have askedfor the loosening of corporate bond regulations.
Local property developers are facing uncertainties asthe Government and the State Bank of Vietnam (SBV) are trying to raise thestandards for real estate bond issuance.
From 2019, banks were asked to cut the ratio ofshort-term loans used for mid-term and long-term lending to a maximum of 30 percentfrom 40-45 percent to strengthen the banking sector and lower financial risks.
The central bank on November 15, 2019 issued a circularto restrict local banks from making loans for customers to trade in corporatebonds.
Under the circular, a bank must record a less-than-3 percentbad debt rate if it wanted to fund corporate bond buying. Customers cannot takeout loans to trade corporate bonds if they used the bonds themselves ascollateral, and total corporate bond-lending must only account for a maximum of5 percent of the bank’s charter capital.
Real estate firms in 2019 raised a total of 106.5trillion VND (4.56 billion USD) from bond issuance. The figure was equal to 38 percentof the economy’s total. Eighty-four percent of the firms had the value of bondissuance triple their equity total, and average bond interest rate was 10.3 percentper annum.
In the first three months of 2020, total corporatebonds raised in Vietnam were worth 37.3 trillion VND, with real estate firmsaccounting for 55 percent of the total and interest rates averaging 10.3 percentper annum./.
VNA
