According to the HCM City Real Estate Association (HoREA), if the “resolution on the bad debts of credit institutions” was approved at the third session of the XIV National Assembly, the “blood clot” hindering economic growth, enabling normal credit operations to return to normal will be solved.
Bad debts of credit institutions have been over 7 billion USD
In the Official Letter No. 57 was signed on June 15th, 2017, the National Assembly Standing Committee’s comments on the draft resolution on dealing with bad debts of credit institutions, HoREA said that according to the report of the State Bank of Vietnam, until December 31st, 2016, the bad debt on the balance sheet of credit institutions was over 7 billion USD, accounting for 2.52% of total outstanding loans.
Notably, the total bad debt purchased by the company VAMC debt but not yet handled was 8.58 billion USD, accounting for 3.39% of total outstanding loans; total bad debt in the table and bad debt sold to VAMC has not processed over 15.18 billion USD, accounting for 5.8% of total outstanding loans; including total bad debt in the balance sheet and bad debt that VAMC has bought but not yet processed and high-risk debt became bad debt on the basis of cautious calculations of the State Bank, accounting for about 10.08% of total outstanding loans.
Still under HoREA, under the condition of uniform application of solutions to limit non-performing bad debt, the bad debt still incurs 1.3- 1.5% of total outstanding debt due to objective and subjective causes. At the same time, with an average annual credit growth target of 16% over the next 5 years (with credit growth of 18.71% in 2016 and a higher credit growth in 2017) In the next 5 years, bad debts will be about 15.4 billion USD, total bad debts will reach 26.4 billion USD which need to be effectively treated without negatively impacting the development of the economy.
Le Hoang Chau, Chairman of HoREA, said bad debts included more than 3.96 billion USD of basic construction debt in the past several years. And yet, bad debt is closely related to the real estate market and to real estate-related industries. In particular, bad debt is also the main reason leading to many real estate projects “cover”, unfinished, Ho Chi Minh City has about 500 projects stopped deploying.
Typically, the bad debt secured by collateral is real estate, real estate projects, housing is completed, housing is formed in the future. That is, “bad debt”, but “property is not bad” because ordinary property mortgaged for credit is only popularly popular with credit institutions at around 60% of real value. The collateral of a bad debt can be the property of the borrower, which may be the property of a third party (the guarantor of the loan), also in the case of the buyer’s home in the project which the owner mortgaged the credit institution, etc. Therefore, HoREA said that when dealing with bad debt, it is necessary to consider the issues mentioned above.
Modification to clear real estate market
In addition to the basic agreement with many contents of the above draft, HoREA also solicited a lot of comments. First of all, that’s the subject matter, HoREA suggested adding “The relevant agencies, organizations, individuals, borrowers, loan guarantors and real estate buyers in real estate projects are Security property “.
For the principle of dealing with bad debt, HoREA proposed to abandon the opening clause: “Trading organization dealing with bad debt shall comply with the following principles:” because the “Principles for dealing with bad debts” not only apply Used for “Bad debt trading organization” which applies to all stakeholders involved in dealing with bad debt.
Mr. Le Hoang Chau said that the Association’s view is in line with the four principles of dealing with bad debts of the draft, but proposed to add the fifth principle: “Ensuring the legitimate interests of borrowers, the loan guarantor and the buyer of the house in the project for which the investor has mortgaged it to the credit institution. “
As for bad debts, the Association endorsed option 1: “Bad debts as stipulated in this Resolution are debts specified in the Appendix on an identification of bad debts of this Resolution. The Standing Committee of the National Assembly shall consider, Amendment of the Annex at the request of the Government “.
Similarly, regarding the right to seize the security property, the Association strongly endorses the content of the seizure of security assets as prescribed only for security property without dispute, not being distrained in the case. Because of the legitimate interests of the guarantor, the buyer of the house in the project that the mortgage has mortgaged to the credit institution.
In particular, regarding the handling of security property as real estate projects, the Association endorses the mechanism for dealing with security property as real estate projects as stipulated in Article 10. Accordingly, “the transferee of the project must meet the conditions of the transferee in accordance with the law on real estate business; to inherit the rights and obligations of project investors and carry out procedures for continuing the implementation of projects in accordance with the law on investment and construction.”
It is known that the Association has repeatedly proposed to amend the Law on Real Estate Business to allow the transfer of projects in accordance with the mechanism defined in Article 10 of the draft Resolution on the handling of bad debts of groups To solve the situation of many real estate projects have been suspended today, in which in HCM City has about 500 projects, and considered the transfer of projects, transfer part of the project. Is a normal business activity among investors together?
“With the promulgation of the mechanism for dealing with security property as real estate projects in the above-mentioned draft adopted by the National Assembly, this will pave the way for revising the Law on Real Estate Business in time. I. The association proposed that the National Assembly allow the widespread adoption of the real estate project transfer mechanism as mentioned above, which would help clear the market for M & A, clearing capital, and restarting the project. It is also a solution that actively contributes to the bad debt of credit institutions, whose owners are real estate enterprises using private capital. Human, completely unrelated to the state budget”, said Le Hoang Chau.
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