Control cash flow, target the right segment

Can you clarify the current capital difficulties in the market?

The issue of capital has been, is and will continue to be a pressure for most real estate businesses. If the issue of capital is not resolved soon, the market recovery will certainly be affected, especially the two most important capital channels: credit and corporate bonds, in the context that Vietnam currently does not have or has not yet developed other capital channels such as real estate investment trusts (REITS), housing funds, etc.

Dr. Nguyen Van Dinh, Vice President of Vietnam Real Estate Association

In fact, the difficulty in mobilizing capital has caused a serious decrease in real estate supply because ongoing projects are forced to suspend, postpone, and delay due to lack of capital to pay contractors and workers. The difficulty in capital sources is not only local but also occurs commonly in all groups of participants in the market, from investors, trading floors, brokers to customers and investors. It can be said that 2022 and 2023 are also the times when the slowness and even "commission explosion" of investors to trading floors are most recorded. There have been many debates and complaints related to this issue.

In addition, homebuyers, including affordable housing projects and social housing, are also facing many difficulties due to increasingly strict credit policies and more difficult disbursement conditions. If they cannot access credit lines for home loans, market output will decline further. In addition, since 2022, the proportion of capital issued from corporate bonds has decreased significantly in the structure of capital for real estate development after some noise related to the commitment to repay bonds of enterprises.

In 2023, the mobilization interest rate and new lending interest rate of commercial banks decreased by about 2%/year compared to the end of 2022, and the year-end home loan interest rate of some banks also decreased compared to 2022. However, real estate enterprises still have difficulty accessing credit capital. In fact, credit agreements are mainly focused on enterprises with good financial status, large land funds with clean projects. Most real estate enterprises do not meet the loan conditions because their health has long been weakened along with market difficulties. A group of enterprises that are eligible to access capital and have the capacity to absorb capital are facing legal problems... In the first months of 2024, consumer credit and real estate loans continued to decline even though lending interest rates remained low, because inflation, interest rate fluctuations, etc. are still unpredictable.

According to you, what is the solution to unblock credit capital for the real estate market?

In my opinion, first of all, on the part of the Government, ministries, branches and the banking system need to promptly issue detailed regulations and guidelines for the implementation of the three newly passed laws (Land Law 2024, Housing Law 2023, Real Estate Business Law 2023-PV), ensuring compatibility between the three laws in terms of scope, subjects, time and space. With issues and obstacles that have not been resolved in the law, ministries and branches need to proactively review, synthesize and research solutions through drafting and submitting for approval specific mechanisms and policies through resolutions to support handling and avoid prolonged congestion. In parallel with adjusting interest rates, banks need to consider and loosen lending conditions so that businesses and customers can increase their access to loans, avoiding the situation where interest rates are reduced but procedures are strict.

For real estate enterprises facing difficulties, the State Bank should create conditions for enterprises to postpone maturing loans, access new credit loans so that projects can be implemented smoothly, reducing pressure on the market. However, it is necessary to control the cash flow injected into the market well, and must target appropriate product segments...

The banking sector needs to continue reviewing and classifying real estate projects to promptly have appropriate credit solutions for qualified enterprises and projects, especially enterprises with projects that meet the real needs of the market, social housing projects, low-cost commercial housing suitable for workers' incomes. In addition, it is necessary to proactively guide and create favorable conditions for home buyers to access bank credit capital to meet housing capital needs. At the same time, promote the implementation of the VND 120,000 billion credit programs for social housing loans, regularly review and evaluate the results of the program implementation to promptly have solutions to remove difficulties and obstacles, and speed up progress.

To improve capital, what recommendations do you have for real estate businesses?

In the current context, real estate enterprises need to proactively review their investment project portfolio, sell part or all of the projects that are not suitable for current resources, proactively restructure debt and plan cash flow. At the same time, focus capital on projects that are legally guaranteed, have feasible loan plans, are likely to be completed early, and are easy to liquidate so that commercial banks have a basis for granting credit. On the other hand, enterprises should reduce profit expectations, even accept selling at a loss, and use profits from previous years to maintain operations. For new projects in the research phase, enterprises need to proactively orient themselves towards the affordable price segment to ensure absorption capacity when launching products to the market.