In mid-2016, HCM City and Hanoi announced a list of more than 100 real estate mortgage projects following the Hamona project in Tan Binh District, HCM City forced by the bank to foreclose.
The school was upset, many projects on the list were boycotted. However, not any bank mortgage project is dark.One characteristic of the real estate market in Vietnam is that the market still depends mainly on bank capital. Capital flows from banks appear almost at every stage of the project, from lending to the developer to the project developer to the borrower to buy a home.
To secure a loan, businesses often pledge assets as projects or other legal assets, or third-party assets (the guarantor). Therefore, almost the majority of real estate projects in Vietnam is deposited in the bank.
In July and August 2016, HCM City and Hanoi announced the list of more than 100 bank mortgage projects that caused the market to wobble. Many projects on this list were boycotted by customers, many other projects did not dare to open because the market psychology was heavily affected.
However, according to experts, carrying the bank mortgage project is not the darkest part of the real estate market, as most of the “safety” of the projects is secured by banks groin. This is the decisive factor in the vitality of the project and reduces the risk to home buyers.
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In addition, with the provisions of the Real Estate Business Act of 2016, a housing project to be established in the future when it is opened for sale must have a bank guarantee and usually the project will be used as a security for the bank. According to real estate experts, these projects help home buyers feel assured, because the project, as well as investors have been appraised by banks.
In fact, the use of bank loans is very important and necessary to implement many projects in the real estate market in Vietnam. This is also the general reality of the real estate market in any country in the world. Businesses bring the project to “plug” the bank to mobilize financial resources to implement the project as quickly as possible quality.
Savills Vietnam also said that for projects that have not been implemented, the use of loans is often needed to implement compensation, site clearance and fulfill financial obligations to the State. In particular, clearance is the most complex stage, requiring a lot of time, finance. Over time, many investors have been stuck and buried in the capital because of not being able to carry out the clearance.
This is the worry about the dark side of bank collateral real estate projects, while the projects have cleared the site, complete financial obligations to the State, that is, create land funds.
By that time, even though the investor can not carry out the project, it can be transferred to another business, helping the project to be launched for sale in the market and then the bank debt is also resolved.
Mr. Su Ngoc Khuong, Director of Investment, Savills Vietnam, said that the nature, debt and mortgage of some real estate projects are not bad, but they are only capital tools for project’s developer and require them to ensure the financial health of the business, as well as the steady cash flow to pay the interest on the loan.
“However, if the owner does not manage well their finances, as well as the ineffective implementation of the project, this will lead to a lack of funds and projects at risk,” he said.
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