Deputy Minister of Construction Nguyen Tran Nam emphasizes that unstable capital sources have caused major hurdles for the real estate market.
Deputy Minister Nam says many countries have their own separate financial system for the real estate sector to best accommodate long-term investment in real estate projects adding that, there is not such channel in Vietnam.
Most Vietnamese businesses are of small and medium sizes, with total charter capital of less than VND1,000 billion, which is not sufficient to get involved in a high-rise building (estimated to cost at least VND1,500 billion), Nam elaborates.
Obviously, he says, many real estate businesses find it difficult to access credit loans. Moreover, these loans have experienced strong fluctuations, standing at around 30% 10 years ago, climbing to 57% in 2008, and declining to 10% in recent years.
There’s growing concern about the Government’s VND30,000-billion aid package, aimed at stimulating the local real estate sector. In 2013 and 2014, credit growth in this sector doubled the nation’s average rate, Nam adds.
He also voices his concern over bad debts, which have been purchased by the Vietnam Assets Management Company (VAMC). Outstanding debts in the real estate market are estimated at below 10% of Vietnam’s total debts. However, collateral in credit rationing of the real estate sector make up about 70%.
To more effectively manage and develop the capital market for the real estate sector, it is necessary to increase capital sources for owners of real estate projects while completing risk management mechanisms for the financial markets.
Ancillary funds can be established, such as life insurance and pension funds, which would also provide long term funding for real estate projects.
