The State Bank’s red-light on negotiable lending rates for real estate investment is expected to cool down the property market.
State Bank governor Nguyen Van Giau recently issued Official Letter No.8883/NHNN-CSTT, telling credit institutions not to provide loans with negotiable interest rates to real estate and financial asset investments.
This means banks have to set lending rates to real estate investments within 1.5 times of the base rate as normal loans.
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| Some buyers have taken unnecessary financial risks to grab a house |
“At this rate, no banks want to lend individuals for buying property,” said Nguyen Thanh Toai, Asia Commercial Bank’s deputy general director. It should be noted that previously, lending to individual customer for buying houses was considered “consumer lending” and banks could set the lending rate freely regardless of the base rate. For other types of credit, banks are allowed to set lending rates within 1.5 times of the State Bank's base rate only.
The latest decision of the State Bank follows the National Financial Supervisory Committee’s recent report on Vietnam commercial banks, which revealed that 2.46 per cent of banks’ total outstanding loans in the Vietnamese banking system were bad debts. The report indicated that banks’ total property sector lending amounted to $8.1 billion as of September this year, 20 per cent higher than the beginning level of the year.
Phan Chi Hieu, chairman and CEO of ThuDuc Housing Development Corporation, said: “Apart from the 25 per cent tax on profit gains from property transfers being put into force recently, the State Bank’s decision is likely to deal real estate developers and investors a death-blow.”
The restrictions on the bank loans could raise fears of a standstill market in the future, Hieu said, adding that, “ThuDuc House has so far mobilised most of its investment capital through joint ventures with foreign partners and from property buyers. However, most of our buyers are property end-users, who are plenty but have limited financial resources”.
VinaCapital Real Estate Company Limited’s deputy managing director David Blackhall said: “The State Bank’s decision is a bad move for the real estate market’s development.” This would have bad impacts on the businesses of not only real estate developers but also bankers, said Blackhall, explaining that if buyers were to leave still thirsty for capital, real estate development would become irrelevant.
