Banks urged to disburse money to rescue property market

Banks urged to disburse money to rescue property market

VietNamNet Bridge – Commercial banks have slashed the lending interest rates, but the real estate credit has not increased considerably, which still cannot warm up the real estate market as expected.

Banks extend hands to real estate developers and buyers

Though the real estate prices have dropped by 30-40 percent, apartments still have been left unsold, because both buyers and real estate developers still cannot access bank loans.

Banks have announced the programs to fund individuals’ plans to purchase houses, promising the low interest rates of 11-12 percent. However, in fact, the interest rates would be applied only for the first 3-6 months. After that period, borrowers would have to pay 16 percent per annum.

At the working session with Minister of Construction Trinh Dinh Dung late last week, Le Huu Nghia, Director of Le Thanh Construction and Service Company Ltd, said though banks said 20 trillion dong have been pumped to the property market; it is still unclear how much has been disbursed.

Nghia urged the Ministry of Construction to ask the Prime Minister to order state banks to give loans directly to buyers to stimulate the demand.

If someone wants to buy an apartment worth 600 million dong and borrows 70 percent of the value of the apartment from a bank at the interest rate of 16 percent per annum, he would have to pay 67.2 million dong in interests a year, while the figure would be 1.008 billion dong after 15 years.

If a client can borrow 600 million dong for 8-10 years at the interest rate of 8 percent per annum, he would be able to buy an apartment valued at 1-1.2 billion dong.

If so, the loan of 20 trillion dong is believed to help 35,000 people purchase houses, thus clearing 50 percent of the total 70,000 apartments which have been left unsold, according to Nghia.

A senior executive of the Hoa Binh Construction and Real Estate Company (HBC), the contractor executing 45 projects nationwide, complained that real estate developers have been very slow in making payment to contractors because the products have been left unsold.

Cutting down expenses to make houses cheaper

Nguyen Phung Thieu, Director of the Saigon Gia Dinh Real Estate Company, thinks that the biggest difficulty for real estate developers is the low demand, not the lack of capital.

Thieu said in order to stimulate the demand, real estate products need to become cheaper to be affordable to more clients. And in order to stimulate the demand, the government should reduce the VAT for a definite time and exempt the land use fee for real estate developers.

The two preferences would help make the real estate prices down by 30-40 percent.

Also according to Thieu, the apartments in district 12 are now priced at 10 million dong per square meter (50-70 square meter apartments). If the above said proposals are accepted, an apartment would be priced at 600 million dong only. And if buyers can borrow 50 percent of the values of the apartments from banks, they would be easily able to possess houses.

Sharing the same view with Thieu, Le Chi Hieu, President of the Thu Duc Housing Development Company, said the weak liquidity is the biggest problem now in the property market.

Hieu said the only solution to improving the liquidity is making houses cheaper for people to buy. He has suggested cutting the VAT from 10 percent to five percent, which would allow real estate developers to lower the sale prices.

Doanh Nhan Saigon