Banks are selling secured properties at discounts to recover debts

A banner advertising a sale of a secured land asset. Many secured assets are being put on auctions to recover debt amid rising pressure from bad debts in the context of economic difficulty. — Photo cafeland.vn

HÀ NỘI — Banks are selling property assets such as land, villas and houses which are used as mortgages for loans on the market at significant discounts in an effort to recover debts. However, it seems to be not easy to find buyers.

Sài Gòn – Thương Tín Commercial Joint Stock Bank (Sacombank) is putting a land plot on Nguyễn Biểu Street, District 5, HCM City on the market at the price of VNĐ282 billion, nearly 50 per cent lower than the asking price in June 2022. The land plot is used as a mortgage for a loan agreement signed in September 2011.

Sacombank said that the Việt Nam Asset Management Company bought this debt then authorised the bank to handle it.

Việt Nam Bank for Agriculture and Rural Development is also putting a 2,293sq.m property on Điện Biên Phủ Street, Thanh Khê District, Đà Nẵng on auction at the initial price of VNĐ246 billion.

Agribank said that the secured loan by this asset amounted to more than VNĐ255 billion as of June 29, 2023, including interests.

Agribank previously announced the auctions of a number of mortgaged properties in Phú Quốc of property developer Tân Hoàng Minh Group with a total outstanding loan of VNĐ500 billion.

A 300sq.m villa in Bắc Từ Liêm District, Hà Nội is also being auctioned by the Bank for Foreign Trade of Việt Nam at the initial price of VNĐ63.66 billion. Specially, this price is nearly two times higher than the price two years ago.

Besides real estate assets, mortgaged assets such as luxury cars, machinery, fishing vessels and factories are also put on the market, but it is not easy to find buyers.

According to the Việt Nam Association of Realtors, real estate assets mortgaged at banks accounted for 70 per cent of the total mortgages for secured loans, thus real estate is the most common type put on auction to recover debts when borrowers fall into insolvency.

The association’s president Nguyễn Văn Đính said that the increasing risk of bad debt forced banks to sell secured assets, especially real estate, at discounts.

There were many listings with deep discounts but still few buyers.

The reason was partly objective, he said, citing the difficult market and economic conditions.

The other part was because the valuation of secured assets was not based on actual value but calculated both principal debts and interests, making it difficult to find buyers, Đính added.

Economic expert Đinh Trọng Thịnh said that most secured assets put on auction to recover debts were of huge value, ranging dozens to hundreds of billions đồng which often had low liquidity.

In addition, if secured assets were machinery, equipment and factories which would degrade over time, finding buyers was difficult.

Legal risk coupled with complicated handling procedures also caused hesitation, he said.

The National Assembly’s Economic Committee in October last year asked the Government to raise specific regulations for handling secured assets.

The Ministry of Construction was considering to put the regulations on handling secured assets into the amended Law on Real Estate with reference to the amended Law on Credit Institutions.