Cash burden alleviation now called for
At the Real Estate Credit Conference hosted by the State Bank of Vietnam (SBV) last week, Le Trong Khuong, vice chairman of Hung Thinh Group said bonds are an excellent source of cash for companies. “Nonetheless, this mobilisation route is now blocked. Bondholders are concerned about the real estate developer’s viability, growth, and ability to reach customers,” Khuong said.
Thanh Hung, a resort real estate broker, said one project is in Dong Nai province is stuck. “My client is trapped, but I also warn him that the investor has not paid the broker’s fee. The investor proposed paying with real estate, but a simple calculation proved that the broker would lose considerable money, so he took the loss,” Hung said.
Other real estate projects from FLC, Tan Hoang Minh, and Van Thinh Phat have been suspended in recent times and the land was reclaimed.
Nguyen Tung Anh, head of Credit Risk Research at FiinRatings said, “Bondholders need early buybacks, which strain the liquidity of real estate developers. In addition, legal procedures in the real estate market and issues with planning permission create delays for projects that cannot be made available for sale or generate greater cash flow.”
Pham Thieu Hoa, chairman of Vinhomes’ Board of Directors, commented on the company’s difficulties, “Real estate is exposed to a high risk coefficient of up to 200 per cent compared to conventional economic operations. Investors and consumers would be affected by the higher loan rates than in other sectors,” he said.
International investors who have entered Vietnam are nearly entirely inactive and in a holding pattern. In addition, high interest rates have an impact on the prices of newly introduced items.
Meanwhile, according to general director of Vietcombank Nguyen Thanh Tung, the objective of banks when engaging with companies is to create mutually beneficial relationships. “Commercial banks strive not to increase interest rates and attempt to implement the SBV’s directive to cut deposit rates, consequently decreasing lending interest rates to support the market and bolstering banks.”
However, in order to fund medium- and long-term capital, the capital market must be engaged in addition to the banking system. “Lately, corporate bonds have played a significant role, but owing to several challenges, the whole medium- and long-term capital demand has fallen severely on the banking system, producing difficulties for banks,” he said.
Nguyen Hung, general director of TPBank, said that the financial institution has operational efficiencies and rivalries with other banks but does not wish to anchor excessive interest rates. “However, objective variables such as global interest rates and inflation are quite high. The US dollar interest rate has risen by 3-4 per cent and has not yet hit its peak,” said Hung.
Chairman of the Ho Chi Minh City Real Estate Association, Le Hoang Chau, said, “Real estate enterprises do not fear the lending interest rates of commercial banks. We do not offer to minimise fees, and we do not offer to cut interest rates. Homebuyers are responsible for these costs since real estate companies include them in the asking price. Restructuring debt while preserving the debt group is now the most challenging aspect for real estate enterprises.”
According to Nguyen Hoang Dung, deputy general director of VietinBank, real estate companies must vigorously sell assets in order to self-structure. “Debt restructuring for real estate companies is inappropriate since this is a market issue. If there is a special system for real estate, other industry groups would want a debt structure as well, which would violate the idea of industry equality.”
“I encourage businesses to invest in their companies, big or small, especially those who have to borrow heavily,” SBV Governor Nguyen Thi Hong added. “Businesses need to have strategies to encourage and re-administer having the financial capacity and capability to repay borrowed funds, while also being able to time-wise enhance their financial capacity, diversify their sources of capital mobilisation, and minimise their dependency on bank credit.”
The government has implemented a number of initiatives to help real estate businesses, such as Decision No.1435/QD-TTg to reduce impediments to the market.
Last December, the SBV also adopted a policy to relax the credit room from 1.5 to 2 per cent. The following month, it established the credit orientation to rise by around 14-15 per cent.
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