Vietnam - Property market under heavy pressure as debt withdrawal deadline nears

There is only over one month left to the deadline for banks to withdraw all property-backed loans. Because of this, enterprises and investors are rushing to manage money to pay bank debts, the local newswire VnMedia reported.

By the end of June 2011, the property loans totalled at 245 trillion dong in which HCM City accounted for 45% and Hanoi 18%, according to reports of the National Finance Supervision Committee.

Under the planned roadmap, commercial banks will have to bring down the non-production lending ratio to 16% by December 31, 2011. This has been causing the heavy pressure on both banks and enterprises in the context that realty companies are sunk in big losses.

Reportedly, during the third quarter of 2011, 80-90% of real estate companies posted losses, typically Housing Investment and Trading JSC (ITC) -38 billion dong, Phat Dat Real Estate Development Co -7.17 billion dong, holding company of Kinh Bac Urban Development Corp -119 billion dong, Thu Duc House Development JSC -5.8 billion dong, and Sudico -9.2 billion dong… Despite big losses, a lot of companies are still managing different ways to push up sales.

Noticeably, PetroLand (PVL) frankly announced to reduce the prices of its apartments by 35% to repay total debts of 100 billion dong to LienViet Post Bank. Lately, Song Da Thang Long Joint Stock Co (STL) accepted to cut a part of commercial floor area to gift customers who buy its apartments. After this promotion program, Song Da Thang Long has also announced it was arranging cash to repay 1.4 trillion dong of debts to banks.

Furthermore, a series of companies announced special offers to stimulate the market. Ocean Group Joint Stock Co (OGC) said those who buy apartments in StarCity Le Van Luong would enjoy the interest rate of up to 22% till the delivery time of September 2013.

Similarly, CEO Group launched the promotion program attached with the largest present of Altis car between October 20 and November 30, 2011 for first 10 customers signing to buy apartments or villas in Sunny Garden City project. Presents are 10 Toyota Corolla Altis 1.8 MT units.

Apart from bank debts, many realty developers are continuously facing tax arrears, some firms owed hundreds of billion of dong and unpaid taxes.

Hanoi Taxation Department recently announced tax arrears of many property giants, notably HUD, investor of Van Canh urban area owed nearly 400 billion dong of principal money, Hanoi General Export Import Joint Stock Co owed 220 billion dong, Vietnam International Urban Development Co (investor of Parkcity) had 152 billion dong of unpaid taxes.

Despite big efforts of companies in pushing sales, the market remains gloomy because the money source is limited.

Director of a Hanoi-based property company stressed, in over one month, banks urged them to pay debts but the firm was able to pay a half of these debts because of big stocks. The company had to mortgage a part of projects to the lenders.

“No bank wants to receive mortgaged projects for paying debts because they need money. Actually banks do not know whom they should sell these mortgaged property projects to”, the director shared.

Business & Investment Opportunities

YourVietnamExpert is a division of Saigon Business Corporation Pte Ltd, Incorporated in Singapore since 1994. As Your Business Companion, we propose a range of services in Consulting, Investment and Management, focusing three main economic sectors: International PR; Healthcare & Wellness;and Tourism & Hospitality. We also propose Higher Education, as a bridge between educational structures and industries, by supporting international programs. Sign up with twitter to get news updates with @SaigonBusinessC. Thanks.