Total outstanding loans in real estate and consumer lending saw a sharp increase, making it necessary to limit consumer loans being used for investment in the real estate sector.
Real estate loans swell despite SBV’s tightening policy
Lending to real estate remains strong despite the fact that the structure of credit has now been shifted to manufacturing sector, especially in priority fields, according to the State Bank of Vietnam (SBV), while loans are tightened to sectors deemed as risky, with a view to ensuring the safety and healthy development of the banking system.
As a result, property developers are having difficulties accessing loans, said Le Hoang Chau, Chair of the HCM City Real Estate Association (HoREA), due to banks’ decision to limit lending in real estate sector as per the central bank’s request.
Nevertheless, in the first five months of 2018, outstanding loans still increased by 6.16 percent as compared with the end of 2017, according to statistics from the SBV. Of which, consumer lending grew by 6.86 percent and real estate loans of 2.19 percent.
During this period, Vietnam saw a boom in real estate market, leading to a rapid increase in land prices in areas poised to become Vietnam’s special administrativeeconomic zones (SEZs).
In HCM City, where the property market has been growing steadily over the last three years, credit growth reached a high rate of 6.42 percent. The city’s outstanding loans in the real estate sector accounted for 10.8 percent of total credit, significantly higher than the country’s levels.
Redefining consumer lending concept
Currently, there is no legal regulation on classifying home repair loans and home purchase loans as consumer lending or real estate loans. This is considered the main reason why experts urge to redefine the concept of consumer lending.
Commercial banks classify home repair loans and home purchase loans as consumer lending, so that lending is not subject to restriction set by the SBV. Statistics have shown that home repair and purchase loans accounted for over 50 percent of the total consumer loans in 2017.
However, it is unadvisable to consider home repair loans and home purchase loans as consumer lending instead of real estate lending, as it can lead to an incorrect real estate credit growth ratio, according to experts. This wrong reflection can cause difficulties for state management in the real estate industry.
In 2017, the Housing and Real Estate Market Management Agency under the Ministry of Construction suggested the SBV not consider home purchase loans as consumer lending, citing this activity as real estate investment. As such, only loans for home repair or home renting should be considered as consumer lending.
Nguyen Hoang Minh, deputy director of the SBV’s branch in HCM City said in the near future, the SBV will take measures to put consumer lending under control, especially lending rates and debt collection methods.
