Nguyen Quoc Hung, director of the State Bank of Vietnam’s (SBV’s) credit department, recently told the media that banks have plentiful liquidity and are ready to lend to risky areas, including the property sector.
“Though we all know real estate is a business with high risks, it does not mean the banks restrict lending to the sector.”
His statement came in the wake of the central bank making public a draft circular on adjustments to the Circular 36/2014/TT-NHNN, stipulating prudential ratios and limits in activities of credit institutions and foreign bank branches.
The draft circular set the risk weight asset ratio to 150 per cent for mortgages worth three billion dong ($126,000) and the rate for loans worth 1.5 to three billion dong at 100 per cent (the current ratio for both loans is 50 per cent).
Besides, it will also adjust the ratio of short-term deposits that can be used for medium- and long-term loans. Under a three-phase roadmap lasting until 2022, the ratio will be reduced to 30 per cent by July 1, 2020, from the current 40 per cent.
The adjustments are expected to help the central bank control liquidity risks to ensure the safety of the banking industry in the face of economic changes, contributing to the country’s sustainable development.
But many experts have slammed this draft circular saying tightening credit for buying luxury homes could shock the housing market.
It would seriously affect the development of the high-end segment, which is expected to help Vietnam improve infrastructure quality and people’s living standards, they claimed.
They suggested that policy makers should reconsider to ensure balanced development of the property market.
The central bank should ask banks to carefully evaluate the financial capacity of buyers before lending to them instead of tightening credit to the entire high-end segment, they said.
A spokesman for the Vietnam Real Estate Association said credit for buying land for speculation purposes could be tightened but it was not necessary to tighten credit for home buying because it stimulates other industries such as construction, cement and steel.
In response to these protests, Hung said the credit tightening would apply to all sectors, not only real estate.
“Banks do not lack capital but need to limit risks. So they will only lend to effective projects that meet legal requirements and prove to be profitable.”
In reality, banks are offering big loans to individuals to buy houses at attractive interest rates.
Vietcombank is offering interest rates of 7.7 to 8.1 per cent for the first 12 months and 8.7 to 8.9 per cent for the first 24 months.
Clearly, the central bank’s new rules are not going to make lenders turn their backs on the real estate sector.
Last year outstanding loans to the real estate sector, including both to developers and house buyers, grew by 31.7 per cent.
In the first quarter of this year it grew by 3.29 per cent, higher than the overall lending growth. VIET NAM NEWS