Bank loans

The real estate sector struggles to access bank loans

Statistics from the State Bank of Vietnam showed that credit in the first half grew by 9.35%, while the credit growth target for the full year is 14%. The remaining credit growth room is equivalent to some VND 450 trillion and is expected to be prioritized for the corporate and manufacturing sectors.

Banks have nearly exhausted their credit growth quotas by lending heavily to real estate projects, the central bank said at a first-half banking sector performance review conference.

While the real estate sector has been hit by the credit crunch, it has had cash flow problems, thus affecting lending banks and ultimately causing a credit crunch, central bank governor Nguyen Thi Hong said.

Dr. Dinh The Hien, an economist, said loans granted to real estate companies in the first eight months of the year were much larger than those granted to other sectors.

Bank loans represent 70% of the value of a real estate project.

According to experts at VNDIRECT Securities Joint Stock Company, there are currently two reasons why real estate companies are accessing bank loans.

On the one hand, the short-term capital ratios used for granting medium- and long-term loans to commercial banks will drop by three points to 34% as of October 1. Thus, they will have to prevent the outstanding amount of real estate loans from exploding as real estate loans are generally matched with medium and long durations.

Second, lending to the housing sector is much riskier than other sectors, so the central bank will allocate additional credit growth allowances to banks with a low proportion of housing loans or no housing loans at all.

Source: Saigon Times