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Vietnam Real Estate Market News

Vietnam Business » Vietnam Real Estate Market News » Capital needed to turn the market rosy

Capital needed to turn the market rosy

For many people, the local property market has weathered the storm and is believed to be on track of recovery after a long hibernation because of the credit tightening policy and economic downturn. Practitioners on the market even made a fearless forecast, saying the local property market would repeat its circle of development and probably kick off another boom this year.

However, regardless of the optimistic forecasts the property market cannot move smoothly on its way of development without sufficient capital injection from different sources. Not only developers need money to speed up their projects, but homebuyers and individual investors need financial support to buy properties for as well. The news that the central bank gave a green light to commercial banks last month, allowing them to apply the method of negotiated lending rates for mid- and long-term loans, is seen as a positive signal for the property market. Some property experts said that although not all lenders could access the loans, the move would help break the ice on the market, encourage it to move forward in the coming time. In reality, most homebuyers and individual investors have used financial support from banks with loans of 15-20 years to buy their properties. This is proved whenever banks squeeze the faucet of the capital pool and the property market turns idle until the financial channel is cleared. Commenting on the issue in Lao Dong newspaper recently, Dang Hung Vo, former deputy minister of natural resources and environment, said the property problem would be solved once the capital problem was solved. The credit tightening policy late last year caused negative effects to the current property market, which is still slow during the first months of this year. Vo emphasized that capital was the tough challenge for investors. Therefore, any capital source increase will further tap the market and any decrease will quickly cool down the heat of the market. As a matter of fact, it is not until now realty firms have rolled up their sleeves to seek capital for their property project development. Some have looked into the issue for years, applying different ways to mobilize capital for their property projects. Among traditional capital source mobilization methods, such as borrowing from banks, pooling capital from customers and making joint ventures and associations with local and foreign corporations, corporate bonds are seen as an effective channel for realty firms quenching their thirst for capital, though such mobilization has yet to be standardized and regulated. Sai Gon Thuong Tin Real Estate Joint Stock Company (Sacomreal) is a case in point. To secure funds to develop its Belleza condo project, also known as Phu My, located in HCMC's District 7, Sacomreal issued bonds worth about VND750 billion. To woo customers, the developer offers each bondholder the right to buy an apartment with a discount from 8%-11% and still earn an annual interest, depending on par value and terms. Dang Hong Anh, general director of Sacomreal, said the company mobilized the target amount of VND750 billion within three days, and late last month Sacomreal organized a lucky draw for its bondholders, offering them the right to buy apartments at discounted rates in the project as promised. He said Sacomreal would continue using this way to mobilize capital to serve upcoming property projects. Unlike Sacomreal, Tai Nguyen Construction, Manufacture and Trading Company has yet to issue corporate bonds to pool capital from customers to finance its luxury condo project Kenton Residences in HCMC's District 7, but it has used banks to monitor its customers' investments. Accordingly, would-be buyers will pay their deposit for apartments via an account at a bank, instead of paying directly to developers as before. 'Gone are the days when developers receive money from their customers, do project sluggishly or try to delay their project for different reasons,' said Vu Anh Tam, general director of the company. Tam explained the method, saying that banks would represent homebuyers to monitor the money and stop disbursement if developers try to delay their projects without a proper reason. By doing this, homebuyers' interests will be ensured and they will know how their money will be used in the projects. The method works. The company has kicked off its first sales program, offering 100 apartments to the market. All are deposited, and the company is preparing to launch its next product in the coming time, according to Tam. Under normal conditions, property is a typical product that requires huge capital for development, thus capital mobilization is a real challenge for realty firms in the face of the economic downturn. For that reason, it is understandable the market is sensitive to any move from banks. It, however, has to wait and see how the loans are translated into reality to make the market rosy in the coming time.

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

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