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Vietnam Business » Vietnam Real Estate Market News » Banks told to control real estate credit tightly

Banks told to control real estate credit tightly

Ngo Xuan Dung, Managing Director of VIB Banks HCM City branch, said demand for loans which fund house and land purchases has been increasing in accordance with social development. Dung said VIB Banks HCM City branch is providing short term loans at an interest rate of 14 percent per annum and providing medium and long term loans at 15-16 percent per annum.

Though outstanding real estate loans had increased by just 4.54 percent by the end of May, the State Bank of Vietnam still says it will strictly supervise real estate lending, because real estate credit is considered the source of non-performing loans.

Demand for loans increasing

Analysts said the real estate market has warmed up in the last five months, as real estate developers have marketed many more commodities with prices that fit the pockets of many more people. Therefore, bankers said, demand for real estate loans has increased. Lending interest rates offered by banks now are high, between 16-17 percent per annum. However, individuals who have the real demand for accommodations still try to access such loans.

Deputy General Director of Asia Commercial Bank (ACB) Bui Tan Tai said that if lending interest rates go down in the time to come, banks will be able to attract more clients who she feels tend to borrow money to purchase land and houses. Tai said ACBs lending interest rates have fallen to 14.5-16 percent per annum. By the end of May 2010, outstanding loans given to individual clients had accounted for five percent of total outstanding loans, half of which was given to fund land and housing purchases.

Dam The Thai, Personal Banking Director of ABBank, said that in the first five months of 2010, consumer outstanding loans of the bank reached 4210 billion dong, of which outstanding loans to fund housing purchases was 1930 billion dong, accounting for 46 percent of outstanding loans given to individual clients.

According to Thai, ABBank hopes such outstanding loans, which will be given to individual clients, will reach 7 trillion dong by the end of 2010.

According to Vietcombanks General Director Nguyen Phuoc Thanh, the banks real estate outstanding loans accounted for 10 percent of the banks total outstanding loans by the end of May 2010.

Unlike small banks, which have been focusing on funding land and house purchases, Vietcombanks real estate credit has been focusing on funding big real estate development projects.

The latest report by the State Bank of Vietnam showed that total outstanding loans of Vietnams entire banking system by May 2010 had increased by 7.46 percent from the end of 2009. In that interim, real estate credit also increased by 4.54 percent, with outstanding loans reaching 192 trillion dong.

Banks told to strictly control real estate credit

Despite low real estate credit growth in the first five months of the year, the State Bank has still instructed commercial banks to strictly control real estate loans in order to reduce bad debts and avoid what they are calling a potential real estate bubble.

Statistics showed that real estate loans have been mostly lent in Vietnams two largest cities, Hanoi and HCM City, which account for 65 percent of all real estate outstanding loans.

According to Ho Huu Hanh, Director of the HCM City Branch of the State Bank, by the end of May 2010, real estate outstanding loans of local banks had reached 85,500 billion dong, an increase of 5,000-6000 billion dong over the beginning of the year.

However, the problem there is that banks non-performing loans tend to increase in the last four months of the year, mostly due to the length of real estate loans. Therefore, Hanh said banks need to remain cautious when deciding to provide loans.

Vietnam Business And Financial News Network. Source [english.vietnamnet.vn]

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