State Bank loosens credit policy

Loans for repairing and purchasing houses using salaries and wages of borrowers to repay will be excluded from real estate credit group together with the loans to complete housing development projects for handover or putting into operation before January 1, 2012.

In addition, loans for housing projects for lease and sale, or accommodation for low income earners in industrial and export processing zones and economic zones will also be excluded from “non-production credit” conditions.

Dang Van Quang, director of property consulting company Navigat, said the State Bank’s loosening of real estate credit would not have much impact on the property market in general as only a limited numbers of borrowers could access bank loans under the new regulations.
Quang said for those who borrow from banks and use wages and salaries to repay loans, the sum they can borrow would be very modest because their salaries were much lower than the total value of a house.

In addition, developers of projects nearing completion would also find it difficult to access bank loans despite the new regulations as with two months remaining they would not be able to finish borrowing procedures.

Nicholas Holt, associate director of Knight Frank Vietnam, said that with the previous regulation to force domestic banks to reduce their lending to the “non-productive” sector to only 16 per cent of the total credit, the real estate market had its back to the wall.

“The credit crisis may lead to a number of developers losing their licenses, selling distressed assets and putting projects on hold. On the project sales side, developers are finding demand restricted and an oversupply is leading to a softening of prices and discounts as they try to attract buyers,” Holt said.

Le Xuan Nghia, vice chairman of the National Financial Supervisory Commission, said the real estate market would be more active when credit was loosened. Nghia said that the regulation on non-production credit limit including real estate sector should not be levered for every credit organisation and it is necessary to which could be named as “non-production factor”.

In April this year, to perform the government’s Resolution No.11, the central bank issued Directive No.01 asking all local banks and foreign bank branches in Vietnam to bring the non-production sector credit growth ratio for total outstanding loans below 22 per cent on June 30 and to 16 per cent as of December 31, 2011.

VIR