Local
real estate firms are facing a shortage of capital as they can’t easily access
bank loans or borrow from their customers like before.
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 mobilized funds,
the property market is especially vulnerable upon any monetary policy change,
as seen in the current situation.
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,
mobilizing capital from customers for new schemes is no longer easy either.
Meanwhile, attracting funds via the stock
market has faced the same difficulty.
Several realty businesses that in 2009 and
2010 had decided to list shares 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 after failing to attract buyers.
The execution of many real estate projects has
thus been suspended for lack of funds.
Tran Minh Hoang, chairman of VinaLand Limited,
said property developers had to find their own ways to find funds. Transferring
land to other partners is a recommended choice, Hoang said.
According to Hoang, land transferring is not a
new trend as it has been seen in strategic investment cooperation among
businesses under which a 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 say it is only feasible for totally new
schemes rather than ongoing projects because complicated transfer procedures
and the current economic downturn discourage merger and acquisition.
Meanwhile, Hoang of VinaLand said that realty
trust investment funds and housing saving funds had yet to be deployed owing to
the absence of support from the local financial system.
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 new ones.
Truong Van Phuoc, general director of the
Vietnam Export Import Commercial Joint-Stock Bank (Eximbank), said there was
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 said.
When asked about realty loans, a credit
officer of the HCMC-based Bank for Foreign Trade of Vietnam (Vietcombank)
revealed that his bank would only disburse funds for property projects the bank
has earlier pledged to finance.
Nam A Commercial Bank’s general director Tran
Anh Tuan said his bank mainly served healthy and potential corporate customers
besides actively collecting debts from property businesses this year.
Tuan hinted at limited new disbursement for
the property industry at his bank until the market recovers.
Tuoi Tre
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