Local
real estate trading firms this year have to keep struggling with capital
shortage to survive the current dull situation as almost all the doors to
capital for them have been slammed shut.
Industry insiders say much-touted policies on
financial and monetary easing will not be available to them, while lenders even
are seeking to recover funds already disbursed to property makers since years
ago.
Continued
mobilisation hardship
In fact, the majority of property firms only
have about 20 percent of invested capital by using their own equities when
developing fresh projects. This means they have to borrow money from banks and
customers to cover the remaining necessary capital, with the ratio of banking
loans accounting for the majority.
Due to this huge reliance on mobilised funds,
the property market is specially vulnerable upon any monetary policy change, as
seen in the feverish or frozen situations.
Credit applications from industry players are
now not accepted by lenders, who themselves are having difficulty recovering
debts from realty projects. Due to the weak liquidity of the market, mobilising
capital from customers for new schemes is no longer easy like before.
Meanwhile, attracting fund via the stock
market has faced the same difficulty.
Several realty businesses that in 2009 and
2010 had decided to list shares for better fund attraction failed to attract
any fund from this channel last year as a result of the gloomy stock market. A
series of property firms were forced to cancel share issuance plans for failing
to lure buyers. Therefore, the execution of many real estate projects has been
suspended owing to developers being thirsty for funds.
Tran Minh Hoang, chair of VinaLand Limited,
said each property developer has to seek funds in their own way. Transferring
land to other partners is also a recommended choice, Hoang suggests.
According to Hoang, land transferring is not a
new trend as it has been seen through strategic investment cooperation among
businesses so far, under which some company will transfer its project partly or
wholly to partners.
For instance, Singapore-based CapitaLand
Limited has invested in a project of Khang Dien Co., in HCM City's District 2
and another one developed by Quoc Cuong Gia Lai Joint Stock Co. in Binh Chanh
District. Similarly, Him Lam Land has poured capital into the Hyco4 Tower
scheme in Binh Thanh District developed by another.
Market observers predict the land-transfer
trend will continue this year but insist it is only feasible for totally new
schemes rather than ongoing projects. Complicated transfer procedures and
present economic downturn discourage merger and acquisition activities, they
point out.
Meanwhile, Hoang of VinaLand notes that realty
trust investment funds and housing saving funds have yet to be deployed owing
to the absence of support from the local financial system.
No
access to banking loans
Since last year, high bad debt ratios coupled
with weak liquidity have prompted many banks to distant themselves away from
lending real estate schemes, especially fresh ones.
Truong Van Phuoc, general director of the
Vietnam Export Import Commercial Joint- Stock Bank (Eximbank), states that there
is little room left for property credit growth at his bank. It is because
Eximbank now concentrates on four groups that are no longer treated as
non-productive segments including low cost-housing projects, Phuoc explains.
When asked about realty loans, a credit
officer of the HCM City-based Bank for Foreign Trade of Vietnam (Vietcombank)
reveals his bank will only disburse funds for property projects the bank has
earlier pledged to finance
Nam A Commercial Bank's general director Tran
Anh Tuan asserts his bank mainly serves healthy and potential corporate
customers besides actively collecting debts from property businesses within
this year. Tuan hints at limited new disbursement for the property industry at
his bank until the market recovers.
Saigon Times
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